China responds to US tariffs as markets dip

China has retaliated to new US tariffs announced yesterday with 5 per cent and 10 per cent tariffs on US$60 billion worth of US imports, the Straits Times reports.

The tariffs will come into effect on 24 September, the same day as US tariffs on $US200 billion worth of Chinese products, announced yesterday, will be implemented.

A Chinese government source, quoted in the South China Morning Post, said that the latest tariffs had caused China to review plans to send a delegation to Washington with Vice-Premier Liu He, confirming previous reports of a rethink.

The immediate effect of the announcement was apparent in the stock markets. The Chinese yuan weakened on Tuesday after the announcement of the US tariffs, even as the economic planning agency outlined plans to increase infrastructure spending in an effort to cushion the economic slowdown.

As outlined in Business Insider, US stock futures and all three major US indexes dropped on Monday after the announcement of the US tariffs, with the Nasdaq posting its biggest loss since July.

The world’s top two companies by market capitalisation, Apple Inc and Amazon.com, fell 2.6 per cent and 3.2 per cent respectively. US treasury yields dropped slightly and oil prices decreased over concerns that increased trade tensions between the world’s two largest economies would dent global crude oil demand.

Based on comments made by President Trump yesterday, the implementation of retaliatory tariffs by China means the US will now consider imposing further tariffs on up to US$267 billion worth of Chinese goods. This could effectively result in almost all exports from China to the US being subjected to tariffs.