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Markets tumble as Trump says trade wars are 'good and easy to win' - business live
Trump tariffs: IMF pleads against trade war as EU threatens to retaliate - live updates
(about 4 hours later)
The World Trade Organisation has said a trade war is in no one’s interests.
Wall Street is staging a late recovery!
In a statement WTO director general Roberto Azevedo said:
In the last few minutes of trading, the Dow is bouncing back from its lows, and the S&P and the Nasdaq are now up for the day....
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.
Here’s a reminder that Canada, Brazil, South Korea and Mexico will take the biggest hit from new steel tariffs:
A trade war is in no one’s interests. The WTO will be watching the situation very closely.
Canada and Brazil are likely to bear the brunt of any tariffs on #steel imposed by @realDonaldTrump, as their steel comprised 16% and 13%, respectively, of US steel imports as of September 2017. pic.twitter.com/AzbVHrd2sp
More on possible EU retaliation, courtesy Reuters:
Gregory Daco of Oxford Economics suggests the new steel tariffs could scupper the hopes of the US rejoining the NAFTA trade bloc:
RTRS sources: EU considering retaliation worth $3.5bn on US steel#SteelTariff pic.twitter.com/9AxeqfjjHS
Interesting breakdown of US #steel imports. If Canada and Mexico aren't carved out of tariffs (it doesn't seem they will) then consequences would be very real for #NAFTA negotiations pic.twitter.com/3TqkV8yzLH
The market falls are continuing.
Canada is mulling its own response to the threat of tariffs on its steel and aluminum sales to the US.
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:
As we reported earlier, Canadian PM Justin Trudeau said such a move was “absolutely unacceptable”. A government source has now told Reuters that Ottawa is considering what sanctions it could impose in retaliation.
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.
Canada is taking nothing for granted, the source added -- another sign that a trade war could break out....
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.
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?
With 45 minutes to go, the Dow is down 222 points, or 0.9%, and heading for a weekly loss.
The Kremlin may be concerned about the proposed Trump tariffs but Russia’s steel makers should be pretty much unaffected, Reuters is reporting:
The vice-president of the European Commission, Jyrki Katainen, has warned that Trump’s new tariffs could trigger a global trade war.
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.
Katainen, who is also the former prime minister of Finland, points out that protectionism helped to create the Great Depression of the 1930s.
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...
A thread on US #SteelTariffs: 1. The announced US tariffs on steel and aluminium are a very dangerous protectionist move. US allies, like the EU, will be more affected than China, where most of the overcapacity is.
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”.
2. US economy’s competitiveness will be hit, as downstream industries will pay much higher prices. #SteelTariffs
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.
3. There is also a serious risk of global trade war, as more economies may take safeguard measures to protect their markets from diverted steel trade flows. #SteelTariffs
Analysts also said the long-term impact for Russian steel and aluminium producers would be muted.
4. The EU will not stay idle and is preparing countermeasures against the US to rebalance trade flows. #SteelTariffs
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.
5. At the same time, we believe it is still possible and preferable to avoid a trade war, as it is difficult to stop it once it starts. #SteelTariffs
The roughly 300,000 tonnes of steel that Severstal exports to the United States can easily be channelled elsewhere, BCS Global Markets experts said.
6. Last time a domino effect of tit-for-tat protectionist measures swamped the world after 1929, and it did not end well. #SteelTariffs (thread ends)
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.
Within Europe, Germany could take the biggest hit from Trump’s new tariffs. That’s because it’s the biggest EU-based exporter of steel to the US:
“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.
Rusal, controlled by businessman Oleg Deripaska, saw its share price fall 3.3 percent. The company did not reply to a request for comment.
EU countries will also worry that steel will be redirected to them, instead of going to America. An influx of extra imports could hurt their domestic industry (although also deliver cheaper prices to consumers)
Russian steelmakers with sizeable exports to the United States would be protected from the impact of tariffs by their U.S. assets, analysts said.
Business Insider have crunched the latest trade figures to show that Canada would take the biggest hit from the tariffs announced on Thursday:
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.
Here are the countries that could get hit hardest by Trump's steel tariff. (Chart by @AndyKiersz) https://t.co/aClnQhkGmv pic.twitter.com/TmOlh4iNI6
More indications of a positive US economy, which in turn adds to the case for further interest rate rises from the Federal Reserve.
Just in: The governor of Wisconsin, Scott Walker, has called on Donald Trump to reconsider his decision on steel and aluminum tariffs.
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.
He warns that US companies which use steel could be driven abroad, costing Americans their jobs.
The survey’s chief economist Richard Curtin said:
.@GovWalker, who is announcing new jobs at United Alloy in Janesville today, says he opposes @realDonaldTrump proposed steel tariffs. #news3 pic.twitter.com/5hnxS4gWD5
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.
Here’s our news story on Wilbur Ross’s comments (complete with that tin of soup)....
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.
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 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 :
With no sign of recovery in stock markets Fawad Razaqzada, market analyst at Forex.com, said:
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.
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.
An economist’s view of the Trump tariffs:
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
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.
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%.
More from Trump, policy by tweet:
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!
