New York (CNN Business)The Dow’s losses are deepening as the latest back-and-forth in the US-China trade weighed on global markets.
It’s crunch time on the trade front with additional US tariffs on Chinese goods due to take effect after midnight on Friday.
During a rally in Florida late Wednesday, President Donald Trump said he decided to raise tariffs on some $200 billion worth of imports from China because Beijing “broke the deal.” He threatened to up existing tariffs from 10% to 25% in a tweet on Sunday.
China’s Commerce Ministry said it considered countermeasures to the increased tariffs. Meanwhile, Chinese Vice Premier Liu He arrived in Washington, which market participants took as a glimmer of hope for a deal to be struck between the world’s two largest economies.
Ongoing negotiations, additional tariffs from the US and retaliation from China could prove to be a prolonged headwind for US companies, said ratings agency Fitch on Thursday. Tech and industrials businesses were the most vulnerable to retaliatory actions, Fitch said, pointing at the likes of Boeing(BA), Intel(INTC) and Texas Instruments(TXN) as examples.
The additional tariffs and possible retaliation “will weaken consumer and business confidence in the context of an already slowing global economy,” said Elena Duggar, assistant managing director at ratings agency Moody’s. Besides tech and industrials, retail and wholesale companies that source finished goods from China could also suffer, Duggar said.
A trade war could knock global supply chains, the Chinese economy and also the global economy.
Traders have taken Trump latest comments, “as a sign that the relationship between Washington DC and Beijing is going to get worse,” said David Madden, market analyst at CMC Markets. “Trade discussions between the two sides will continue today, but investors aren’t holding out much hope. Mr Trump is not a man to back down, and it looks likely that this trade spat will move to the next level.”
Nevertheless, as of now, the 11th hour talks are set to go ahead, so the negotiations are not entirely dead in the water.
But perhaps investors should try to look “through the headlines to see the forest from the trade war trees,” wrote strategists at Rabobank in a note.
“First and foremost, the negotiations are still going ahead today and have not been canceled, in spite of the exchange of threats.”