The US is bring the world’s leading economic powers ever closer to a protectionist trade war as the Trump administration prepares to announce a new list of products from China to be targeted with a 25 per cent duty.
The list is expected to contain everything from pharmaceuticals to flat screen televisions.
The US says tariffs are justified because of China firms’ longstanding theft of US companies’ intellectual property, and the move follows President Trump’s decision to levy tariffs on steel and aluminium imports from Canada, the EU and Japan, as relations between the leading G7 nations decline.
Fiona Cincotta, Senior Market Analyst at City Index says that the new tariffs show that President Trump is looking to take its trade argument with China to “another level”.
She said: “Asian investors are already bracing themselves for the fallout which could potentially spread from metals producers onto other industries such as car makers.”
According to a report by the Wall Street Journal the approval for the new set of tariffs followed a 90-minute meeting of senior White House and national-security officials and senior representatives of the Treasury and the Commerce Department.
The US is expected to publish the exact list of goods today.
The Shanghai Composite Index has fallen to its lowest level in 20 months.
Konstantinos Anthis, Head of Research at ADS Securities has described President Trump as the “X-factor that market participants didn’t anticipate”.
Mr Anthis warns that Mr Trump is playing the dual role of peacemaker and trade war-monger by leveraging public opinion following progress on the Korean peninsula against increased confrontation with China on trade.
He said: “The US President said that he plans to confront China ‘very strongly’ over trade in the coming weeks and that he intends to announce a fresh list of tariffs by Friday.
“A very interesting reading of the geopolitical status of play suggests that after Trump befriended North Korea in Singapore, China lost an important leverage factor. According to this view, this emboldens the US President to go hard against the Asian giant which means that trade war risks are coming to the forefront once more.”
Beijing has promised to retaliate against any US tariffs and Wang Yi, China’s top diplomat, has warned US secretary of state Mike Pompeo against any decision that would involve “confrontation and mutual loss”.
President Trump is looking to attack the massive $337billion (£254 billion) annual trade surplus with China and believes that the US has nothing to lose in such a trade war.
On the threat of retaliatory tariffs, he said: “They do so much more business with us, than we do with them, that we can’t lose.
“The numbers are so astronomically against them.”