March 23, 2018
Stocks Drop Most in Six Weeks on Trade War Tension: Markets Wrap
U.S. stocks tumbled, pushing benchmark gauges back toward the lows set during the worst of the February rout, as President Donald Trump’s decision to slap tariffs on Chinese goods heightened concern that a trade war could throttle global growth. The S&P 500 Index sank 2.5 percent, the biggest one-day drop in six weeks, and the Dow Jones Industrial Average lost more than 700 points. As investors dumped stocks, they rushed to the safety of the Treasury bond market, where yields fell back toward 2.8 percent, and the yen, which rallied the most in three weeks. In a stock market that’s been floundering ever since it hit record highs in late January, the prospect of a widening trade spat only added to jitters. Traders had already been bracing for the possibility of slowing growth as the Federal Reserve reiterated its commitment to further interest-rate increases after Wednesday’s hike. Not even technology stocks, long the favorite of Wall Street investors, have provided relief of late as the latest data fiasco at Facebook sparked a rout in the sector this week. The Nasdaq is down more than 6 percent since its record 10 days ago. “Tariffs mean a trade war and the news has the world’s investors running for the exits,” Chris Rupkey, chief financial economist at MUFG Union Bank. “Those are storm clouds out there, that’s what the stock market is saying and that’s why investors are running for the exits.”
Europe Demands Permanent Waiver From U.S. Metal-Import Tariffs
European Union leaders demanded a permanent EU exclusion from U.S. President Donald Trump’s metal-import tariffs and kept alive a threat to retaliate, highlighting persistent risks of a trans-Atlantic trade war. Citing national security, Trump on Friday imposed duties of 25 percent on steel and 10 percent on aluminum while granting a five-week waiver to the EU, Canada, Mexico, Brazil, Argentina, Australia and South Korea. An exclusion for those countries beyond May 1 will depend on the status of “discussions of satisfactory long-term alternative means to address the threatened impairment to U.S. national security,” the White House said. The EU’s heads of government responded with a sharply-worded statement expressing “regrets” that Trump imposed the metal tariffs at all, saying the measures fail to address the root problem of overcapacity and insisting Europe has already offered the U.S. “full cooperation” to help re-balance the global market. “These measures cannot be justified on the grounds of national security, and sector-wide protection in the U.S. is an inappropriate remedy for the real problems of overcapacity,” the bloc’s 28 national leaders said in the statement released on Friday in Brussels. The EU has spent the past several weeks scrambling for a waiver from the U.S. metal tariffs while warning that a failure to gain one would lead to a tit-for-tat response on 2.8 billion euros ($3.5 billion) of imports of U.S. goods including Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey.
China Hits Back on Trump Tariffs as Europe Off Hook for Now
The trade conflict between China and the U.S. escalated, with Beijing announcing its first retaliation against metals levies hours after President Donald Trump outlined fresh tariffs on $50 billion of Chinese imports and pledged there’s more on the way. On Friday, China unveiled tariffs on $3 billion of U.S. imports in response to steel and aluminum duties ordered by Trump earlier this month. The White House then declared a temporary exemption for the European Union and other nations on those levies, making the focus on China clear. Though Beijing’s actions so far are seen by analysts as measured, there may be more to come. Equity indexes from Tokyo to Frankfurt tumbled with European equities falling to the lowest in more than a year. U.S. stock futures dropped, signaling a further retreat for the S&P 500 Index after it fell 2.5 percent, on risks a further escalation in trade tensions will undermine an unusual phase of synchronized global economic growth. Suppliers to Apple Inc. were among the hardest hit in Hong Kong and mainland markets on Friday, as investors focused on potential losers from the trade spat. “China’s response is surprisingly modest in light of the U.S. actions, suggesting there could be a good deal more to come,” said Stephen Roach, a former non-executive chairman for Morgan Stanley in Asia and now a senior fellow at Yale University. “As America’s third largest and most rapidly growing export market and as the largest foreign owner of Treasuries, China has considerably more leverage over the U.S. than Washington politicians care to admit.”