This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2018/mar/02/markets-fall-trump-tariffs-uk-construction-may-pound-brexit-carney-live

The article has changed 4 times. There is an RSS feed of changes available.

Version 0 Version 1
Markets fall as Trump says trade wars are 'good and easy to win' - business live Markets tumble as Trump says trade wars are 'good and easy to win' - business live
(about 4 hours later)
If a trade war is really breaking out, then kitchen equipment maker Electrolux has just fired another shot - by threatening to pull investment in America. The World Trade Organisation has said a trade war is in no one’s interests.
Reuters has the details: In a statement WTO director general Roberto Azevedo said:
Sweden’s Electrolux, Europe’s largest home appliance maker, said on Friday it would put on hold a planned $250 million investment in the United States after President Donald Trump announced he would impose tariffs on imported aluminium and steel. The WTO is clearly concerned at the announcement of US plans for tariffs on steel and aluminium. The potential for escalation is real, as we have seen from the initial response of others.
“We are putting it on hold. We believe that tariffs could cause a pretty significant increase in the price of steel on the U.S. market,” Electrolux spokesman Daniel Frykholm said. A trade war is in no one’s interests. The WTO will be watching the situation very closely.
Economics professor Adam Posen has roundly blasted the idea of imposing fresh tariffs on imports of steel and aluminium into the US. More on possible EU retaliation, courtesy Reuters:
Posen, the president of the Peterson Institute for International Economics, told CNBC the plan was “just straight up stupid,”, adding: RTRS sources: EU considering retaliation worth $3.5bn on US steel#SteelTariff pic.twitter.com/9AxeqfjjHS
This is fundamentally incompetent, corrupt or misguided.” The market falls are continuing.
Posen also took issue with President Trump’s argument that he was protecting US jobs and industries, as: The Dow Jones Industrial Average is now down 1.3%, the FTSE 100 has fallen 1.4% and Germany’s Dax is down 2.3%. Chris Beauchamp, chief market analyst at IG, said:
Steel is just a tiny input in the U.S. gross domestic product (GDP) which is why it’s so crazy. The selling continues apace across markets this afternoon, with the phrase ‘sea of red’ getting an outing once more. It is indeed a ‘risk-off’ afternoon in the old-fashioned sense of the term, with gold being furiously bought as risk assets are dumped unceremoniously overboard.
According to CNBC, there were roughly 140,000 Americans employed in steel mills in 2015, while 6.5 million Americans worked in industries that consumed steel. More here. Tariffs do not go down well, it seems. European markets, with their heavy concentrations of industrial stocks, are suffering a double whammy of US tariff concerns and the return of their old foe, a stronger euro. In London the big news has been the speech from the Prime Minister. As ever, it has generated the usual variety of responses, but the aim of conciliatory approach from the UK runs through the text, emphasising the need for both to come together. Given it has been so heavily trailed there has been little market reaction, and the ball now lies in Brussels’ court.
‘Straight up stupid,' 'incompetent' and 'misguided’: Economist @AdamPosen tells us on the #tariffs https://t.co/dM1pmKvDnk While Friday harks back to the crisis days of market volatility, the weekend will resemble those of times past too, as markets wait for results from Germany and Italy. Both are important in their own way, and will help set the tone come Monday, although in the case of Italy maybe no government will be better than one committed to disrupting the established order?
The Mexican peso is sliding this morning, making it the worst-performing major currency against the US dollar. The Kremlin may be concerned about the proposed Trump tariffs but Russia’s steel makers should be pretty much unaffected, Reuters is reporting:
Trump’s protectionist stance on trade wars and tariffs are undermining hopes that America could rejoin the NAFTA pact. Russian metals and mining companies face relatively little harm from any introduction of U.S. tariffs on steel and aluminium imports, analysts and company representatives said on Friday.
Trump's tweet and tariffs definitely getting people freaked out about the prospects for a NAFTA agreement. The peso is today's biggest loser. https://t.co/owsma438YV pic.twitter.com/4G51ccgmZb Russia’s top two steelmakers and its leading aluminium producer saw their share prices fall after President Donald Trump said he would impose hefty tariffs to protect U.S. producers...
The European Commission has warned it will impose countermeasures against America, if new tariffs are imposed on EU aluminium and steel. Russia shares Europe’s concern about the decision, Kremlin spokesman Dmitry Peskov said on Friday, adding that Moscow is “carefully analysing the situation which is forming in trade relations after this statement”.
EC president Jean-Claude Juncker has vowed to ‘react firmly’ to president Trump’s move, saying: Russian deputy prime minister Arkady Dvorkovich said he expected some damage to Russia from the new duties, Interfax news agency reported, but he added that any harm would be more significant for the European Union and China.
“Instead of providing a solution, this move can only aggravate matters. The EU has been a close security ally of the US for decades. We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk. The EU will react firmly and commensurately to defend our interests. Analysts also said the long-term impact for Russian steel and aluminium producers would be muted.
The Commission will bring forward in the next few days a proposal for WTO-compatible countermeasures against the US to rebalance the situation. For Severstal, a leading steel producer, and Rusal, the small size of their U.S. sales makes it easy to redirect to other markets, analysts said.
Trump on trade: "Trade wars are good, and easy to win". Markets clearly not liking that assessment. Stock futures are tanking and dollar at lowest yen level since since 2016 The roughly 300,000 tonnes of steel that Severstal exports to the United States can easily be channelled elsewhere, BCS Global Markets experts said.
Russia has also expressed concern over Donald Trump’s plans. This was echoed by company representatives, who told Reuters the United States accounted for just 2 percent of Severstal’s sales, though the company’s shares were down 2 percent.
In a daily briefing with journalists, Kremlin spokesman Dmitry Peskov said that Moscow shares European capitals’ concern with reports of the adoption of new steel and aluminium tariffs by the United States. “As for aluminium, it is a virtually zero issue as Rusal sells only around 10 percent to 15 percent of volumes there and will send the material elsewhere at virtually no cost,” BCS wrote in a note.
“This situation deserves close attention,” Peskov, who serves as a personal spokesman to Russian President Vladimir Putin, told journalists by phone. Rusal, controlled by businessman Oleg Deripaska, saw its share price fall 3.3 percent. The company did not reply to a request for comment.
Peskov added: Russian steelmakers with sizeable exports to the United States would be protected from the impact of tariffs by their U.S. assets, analysts said.
“We know that extreme concern has been expressed in many European capitals with these kinds of decisions. Steel producer Evraz, co-owned by Chelsea football club owner Roman Abramovich, exports 0.4 million tonnes of steel slabs to the United States, but its North American assets sell 2.2 million tonnes on the U.S. market, VTB Capital analysts said. Domestic price rises would more than offset the new costs.
We share this concern and are carefully analysing the situation which is unfolding now in trade relations after this announcement.” More indications of a positive US economy, which in turn adds to the case for further interest rate rises from the Federal Reserve.
Stock markets are falling deeper into the red, following Donald Trump’s declaration that America could easily win a trade war. US consumer confidence came in at a better than expected last month, according to the University of Michigan. Its consumer sentiment index rose from 95.7 in January to a final figure of 99.7, better than the expected 99,5 but just below the initial reading of 99.9. The rise came amid the stock market turmoil seen in February and before the latest trade war fears, but followed the Trump tax reforms.
In London, the FTSE 100 is now down 73 points, or 1%, at 7101. That’s a new three-week low. The survey’s chief economist Richard Curtin said:
Mining companies are suffering from the prospect of protectionism - as demand for iron ore, coal, copper, oil and nickel would all weaken. Consumer sentiment remained quite favorable in February, at its second highest level since 2004. Consumers based their optimism on favorable assessments of jobs, wages, and higher after-tax pay. The highest proportion of households since 1998 reported that their finances had improved compared with a year ago and anticipated continued gains during the year ahead.
Germany’s DAX is still lurching around a six-month low. Economic news heard by consumers continued to be dominated by the tax reform legislation and net job gains, which was untarnished by the consensus view that interest rates would increase and stock prices would remain volatile. Although rising interest rates was seen as a reason to temper their longer term outlook for the overall economy, only a modest moderation in the pace of economic growth was anticipated.
Lukman Otunuga, research analyst at FXTM, says investors around the globe are worried: Although consumers expected the unemployment rate to dip below 4% in 2018, only modest wage growth was anticipated, and inflation expectations have remained unchanged. Interest rates, even when pushed higher in the weeks and months ahead, will not cause postponement of discretionary purchases as long as income continues to rise near its present pace. Personal tax cuts are crucial to spur additional spending, but unlike prior cuts that had an immediate positive impact, this tax cut has not generated universal support across partisan lines. Overall, the data signal an expected gain of 2.9% in real personal consumption expenditures during 2018.
A negative vibe lingered across financial markets on Friday, after Donald Trump’s vow to impose severe tariffs on imports of steel and aluminium sparked fears of a global trade war. A bit of historical context. The last time the US went big on protectionism it ended in the Great Depression. Here’s a piece from my colleague Dominic Rushe from earlier in the year when Trump was also talking tough on trade :
In a move that dealt a blow to global sentiment, Trump said on Thursday that the United States would set tariffs of 25% on steel imports and 10% on aluminium. With no sign of recovery in stock markets Fawad Razaqzada, market analyst at Forex.com, said:
This bombshell development is likely to fuel concerns of retaliatory actions from major US trade partners consequently weighing on risk appetite. Investors are clearly jittery by the threat of a potential global trade war and its possible effect on stock markets. Will we really see the start of a trade war? The truth is, the world relies on the US in one way or the other. Retaliation could only hurt the retaliator. So these warnings may not be backed up by action. In fact, there is even the small possibility that Trump may do a U-turn. However, Trump does seem to enjoy global confrontation and with mid-term elections fast approaching, he may press ahead as he aims to protect domestic companies from what he feels unfair trade arrangements.
Wall Street is also expected to suffer falls when it opens in three hours time. So, as we head into the weekend, sentiment towards both the stock markets and the dollar are clearly negative. The dollar is doing slightly better against commodity currencies, which tend to be move up and down with risk appetite changes. However, against the euro and in particular, the yen, a safe haven currency, the greenback looks rather weak.
The Dow Jones industrial average is being called down around 200 points, or 0.9%. That would add to yesterday’s 420-point tumble. An economist’s view of the Trump tariffs:
Futures are falling even more after Trump tweets that trade wars are good and easy to win. https://t.co/sd1mRP4o0x pic.twitter.com/Wa795VtiR0 One reason why Trump's tariffs are likely to backfire. The number of people who work in steel consumption (who will suffer because of higher prices) is much greater the number who work in steel production (who will benefit). pic.twitter.com/vgHKhZTGrq
Newsflash: President Trump has tweeted that it will be easy for America to win a trade war: The prospect of a trade war prompted by Donald Trump’s proposed tariffs on steel and aluminium imports has unsurprisingly sent US markets sharply lower.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy! The Dow Jones Industrial Average is currently down 322 points or 1.2% while the S&P 500 opened down 0.8% and the Nasdaq Composite just over 1%.
That’s unlikely to calm nerves in the financial markets.... More from Trump, policy by tweet:
David Lowe, head of international trade at law firm Gowling WLG, predicts that president Trump could announce more protectionist policies in the weeks ahead. When a country Taxes our products coming in at, say, 50%, and we Tax the same product coming into our country at ZERO, not fair or smart. We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice!
Lowe says:
“All the figures suggest that the first year of any administration is the calm before the storm. The groundwork is done and the wind builds. Now Trump’s first year is complete with the potential for the floodgates to open, it’s safe to assume this may not be the only shock policy announcement.”
A recent report from Gowling found that the USA has the biggest protectionist stance across the world. Since 2009, it has made 1,085 more protectionist measures more than liberalising ones.
Anders Fogh Rasmussen, the former head of Nato and ex-Danish prime minister, warns that tariffs will hurt a range of US businesses who use steel.
He also fears that Europe could face pressure to become more protectionist too.
.@realDonaldTrump, a trade war will RISK American jobs. US steel-using industries employ 80 times more than the steel industry. But it will also make all freedom-loving democracies poorer & less free. If the US turns protectionist how long can Europe hold out? Last man standing pic.twitter.com/yO78TJ48RX