US stocks close higher even as US-China dispute escalates

Thursday, 05 Apr, 2018

The dollar fell and global stock markets edged higher on Wednesday after China retaliated in a trade dispute with the United States, but Wall Street rebounded from a steeply lower opening on the notion a tariff war has not begun and any impact is too early to foresee.

Adams, of PNC Financial, said the tariffs would be especially painful for companies in agriculture: machinery makers in the US would pay more for imported components, and they wouldn't sell as much food in China because their products would be more expensive.

"We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.", Trump tweeted.

While the dispute centers around a $375 billion goods trade imbalance in favor of China, the also now targeting high-tech sectors that Beijing sees as the future for its economy, prompting an angry reaction. The tariffs total $50 billion - the same amount the proposing on about 1,300 Chinese products. But it was South Korea that saw the big move as it dropped 1.4%. Regulators use access to China's vast market as leverage to press foreign automakers and other companies to help create or improve industries and technology. In response, China on Sunday slapped tariffs on $3 billion on agricultural products from the US including hog parts, wine, fruit and nuts.

United States orange juice, certain sorghum products, cotton, some types of wheat, as well as trucks, some sport-utility vehicles, and certain electric vehicles, will also be subject to the new tariffs, according to the Chinese Finance Ministry.

The Trump tariff on imported solar panels is 30 percent the first year, then gradually falls to 15 percent in four years.

The United States buys little steel and aluminum from China, but analysts said Beijing felt compelled to respond, partly as a "warning shot" ahead of an expected fight over technology.

Asian stocks fell, with the MSCI Asia Pacific Index declining 0.6% to the lowest in nearly eight weeks. Germany's 10-year yield dipped one basis point to 0.49%, the lowest in 12 weeks.

When he signed the tariffs into effect on March 8, Trump exempted Canada and Mexico and gave other countries the chance to argue why they should also be exempted.The S&P 500 rose 0.45 percent and 1.74 percent on March 8 and 9 before beginning a four-day slide the following week. The S&P 500 closed up 1.2 percent.

A deputy finance minister, Zhu Guangyao, appealed to Washington to "work in a constructive manner" and avoid hurting both countries.

US farmers, too, stand to lose their biggest trading partner.

The American Soybean Association says this would be devastating to USA farmers since they say China is the largest consumer of US soybeans. A full-fledged trade war could slow global commerce. The FTSE 100 in Britain gained 0.1 percent.

Wholesale gasoline stayed at $1.98 a gallon. US crude settled down 14 cents at $63.37 per barrel and Brent slid 10 cents to settle at $68.02.

Bond prices turned lower.

The swing in risk sentiment sucked some strength out of the dollar and put the pep back into bonds, with yields on USA 10-year Treasury debt down two basis points at 2.76 per cent.

In commodity markets, gold jumped 0.7 per cent to US$1,342 an ounce, recovering some of Tuesday's losses.

GM rival Ford Motor Co F.N lost as much as 3 percent while electric carmaker Tesla TSLA.O Inc, which depends on China for 17 percent of its revenue, fell as much as 5.8 percent.