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Shares tumble on trade war fears | |
(35 minutes later) | |
Stock markets have dived on fears that US President Donald Trump's plan for tariffs on up to $60bn of Chinese products could trigger a trade war. | |
Japan's Nikkei share index fell 4.5% and in the US the Dow Jones sank 2.9%. | |
China responded to news of the planned tariffs by saying that while it did not want a trade war, it was "absolutely not afraid" of one. | |
The US tariffs are a response to allegations of intellectual property theft by China. | |
Beijing said it firmly opposed the new tariffs but China's ministry of commerce said it was "confident and capable of meeting any challenge". | |
"China will not sit idly by its own legitimate rights and interests. We are fully prepared to defend our legitimate interests," the ministry said. | "China will not sit idly by its own legitimate rights and interests. We are fully prepared to defend our legitimate interests," the ministry said. |
But it said it hoped the US would not drag bilateral economic and trade relations into danger. | But it said it hoped the US would not drag bilateral economic and trade relations into danger. |
Fears of a trade war pushed stock markets down sharply. Sydney's S&P/ASX 200 lost 2%, while China's markets were all in negative territory in afternoon trade. | |
On Thursday, US stocks had also tumbled, with the S&P 500 index ending the day down 2.5%. | |
Earlier on Friday, China announced its own set of proposed tariffs worth $3bn. Beijing said these were in response to US tariffs on steel and aluminium imports announced by Mr Trump earlier this month. | |
The US tariffs on steel and aluminium imports come into effect this week. | |
But China, which is the 11th biggest exporter of steel to the US, said it was considering measures "to balance out the losses caused to Chinese interests". | But China, which is the 11th biggest exporter of steel to the US, said it was considering measures "to balance out the losses caused to Chinese interests". |
The commerce ministry said the list of products under consideration for its own tariffs includes pork, wine, fruit and nuts and stainless steel pipes. | The commerce ministry said the list of products under consideration for its own tariffs includes pork, wine, fruit and nuts and stainless steel pipes. |
It said it was planning two steps of retaliatory action: | It said it was planning two steps of retaliatory action: |
Why is the US taking tariff action? | Why is the US taking tariff action? |
The US imports billions more goods from China each year than it exports, creating a deficit of about $375bn last year - which is what Mr Trump has railed against. | The US imports billions more goods from China each year than it exports, creating a deficit of about $375bn last year - which is what Mr Trump has railed against. |
The president said on Thursday he had asked China to cut that deficit by $100bn "immediately". | |
But the new US tariffs follow an investigation into Chinese policies ordered by Mr Trump in August. | But the new US tariffs follow an investigation into Chinese policies ordered by Mr Trump in August. |
The White House said this found a range of "unfair" practices in China, including restrictions on foreign ownership that pressured foreign companies into transferring technology. | The White House said this found a range of "unfair" practices in China, including restrictions on foreign ownership that pressured foreign companies into transferring technology. |
The review also found evidence that China imposes unfair terms on US companies; steers investments in the US to strategic industries; and conducts and supports cyber attacks. | The review also found evidence that China imposes unfair terms on US companies; steers investments in the US to strategic industries; and conducts and supports cyber attacks. |
The White House said it had a list of more than 1,000 products that could be targeted by tariffs of 25%. Businesses will have the opportunity to comment before the final list goes into effect. | The White House said it had a list of more than 1,000 products that could be targeted by tariffs of 25%. Businesses will have the opportunity to comment before the final list goes into effect. |
The US is also exploring ways to limit Chinese investment in the US and will seek to bring complaints about unfair licensing terms to the World Trade Organization, officials said. | The US is also exploring ways to limit Chinese investment in the US and will seek to bring complaints about unfair licensing terms to the World Trade Organization, officials said. |
Who are the potential losers in a trade war? | Who are the potential losers in a trade war? |
US officials had acknowledged the possibility of retaliation from China, but said the Asian giant ultimately had more to lose. | US officials had acknowledged the possibility of retaliation from China, but said the Asian giant ultimately had more to lose. |
If imposed as described, the US tariffs could lead to higher costs for consumers, while China's retaliation would hit key sectors of the US economy including agriculture and aerospace, analysts say. | If imposed as described, the US tariffs could lead to higher costs for consumers, while China's retaliation would hit key sectors of the US economy including agriculture and aerospace, analysts say. |
China was the third largest market for US exports in 2016 and among the biggest buyers of American corn, pork and aircraft. | China was the third largest market for US exports in 2016 and among the biggest buyers of American corn, pork and aircraft. |
China is also the world's biggest consumer of soybeans and consumes about one third of the US crop. | China is also the world's biggest consumer of soybeans and consumes about one third of the US crop. |
But in news which will come as a relief to US farmers, Friday's announcement did not include the soybeans. | But in news which will come as a relief to US farmers, Friday's announcement did not include the soybeans. |
Is there wider support in America for the plan? | Is there wider support in America for the plan? |
Critics of Mr Trump's policies dismiss worries about the trade deficit, saying the exchange benefits both sides. | Critics of Mr Trump's policies dismiss worries about the trade deficit, saying the exchange benefits both sides. |
However, there is growing bipartisan concern in America about China's state-led economy and there is a worry that China is seeking technology that could be deployed for military purposes. | |
Mr Trump's America First policy remains popular with large sections of the US public. | Mr Trump's America First policy remains popular with large sections of the US public. |
However, trade watchers in Asia says China's retaliation will no doubt be carefully targeted to hit key Trump-supporting areas of the US. | |
"The Chinese have been developing their list for more than a year and they are very good," said Deborah Elms, executive director of the Asian Trade Centre in Singapore. | "The Chinese have been developing their list for more than a year and they are very good," said Deborah Elms, executive director of the Asian Trade Centre in Singapore. |
"If things get very nasty, they can also make life very difficult for US companies doing business in China. It's going to be very interesting." |