Stocks move lower as U.S. plans tariffs on China

Global stock markets were mostly lower on Friday as U.S. President Donald Trump’s approval of a plan to impose tough tariffs on China renewed concerns about trade friction.

Futures augured a weak start on Wall Street. S&P futures fell 0.4 percent while Dow futures dropped 0.6 percent.

The administration plans to release a detailed list of 25 percent tariffs worth about $50 billion that will be placed on Chinese imports, which could be released as early as Friday, June 15. Goods tied to Beijing’s ambitious “Made in China 2025” plan will be included, such as aerospace products, semiconductors and robotics. 

“Chinese retaliation is likely to be reciprocal and quick, with Beijing ready to implement tariffs of its own shortly after the US levies go into effect,” according to a research note from Eurasia Group. “There remains a substantial risk of escalation and a more prolonged dispute that lasts through the summer and into the fall.”

Britain’s FTSE 100 fell 0.7 percent to 7,707, while France’s CAC 40 added 0.1 percent to 5,535. Germany’s DAX edged down 0.3 percent to 13,072. 

TARIFF DETAILS

Trump approved a plan to impose punishing tariffs on tens of billions of dollars of Chinese goods as early as Friday. The White House has yet to release a final list of products but a tentative version in April ran the technology gamut from TVs and telecoms equipment to medications and industrial chemicals. 

U.S. officials say the tariff hike targets goods that might benefit from Chinese theft of technology or pressure on foreign companies to hand it over in exchange for market access.

“Ultimately a negotiated solution is likely,” said Shane Oliver, head of investment strategy at AMP Capital. Even though China and the U.S. probably want to negotiate, “the risks are high and the tariffs could well be implemented before the issue is resolved.”

The initial tariffs are likely to go into effect immediately, prompting a response from China, Eurasia Group noted. 

“Beijing will continue its recent playbook: match US moves quickly and in a largely reciprocal manner, at least its terms of formal measures of retaliation,” its analysts wrote. “Beijing’s goal is to demonstrate that it does not fear climbing with the U.S. up the escalation ladder, but that is also acting with restraint and will not escalate on its own.”

ECB INTEREST RATES 

The ECB on Thursday said it would phase out by the end of the year its bond-buying stimulus for the 19 countries that use the euro. It had deployed the program in 2015 to save the region from the risk of falling prices and growth. It also said it plans to hold off on raising interest rates until at least the summer of 2019, which is longer than some investors expected.

ASIAN STOCKS

Asian stocks finished mixed. Japan’s Nikkei 225 finished 0.5 percent higher at 22,851.75 but South Korea’s Kospi retreated 0.8 percent to 2,404.04. Hong Kong’s Hang Seng index declined 0.4 percent to 30,309.49 while China’s Shanghai Composite Index fell 0.7 percent to 3,021.90. Australia’s S&P-ASX 200 jumped 1.3 percent to 6,094.00. Stocks in Taiwan were higher, while in Indonesia markets were closed for a holiday.

CURRENCIES AND OIL

The dollar was flat at 110.65 yen and the euro strengthened to $1.1591 from $1.1560.

Benchmark U.S. crude lost 20 cents to $66.69 per barrel in electronic trading on the New York Mercantile Exchange. On Thursday, it rose 25 cents to settle at $66.89 per barrel. Brent crude, the international standard, fell 92 cents to $75.02 per barrel. On Thursday, it fell 80 cents to $75.94.