Global markets have sunk due to fears that the United States and China may be veering toward an all-out trade war. In early European trade London fell 0.8 percent, Paris 1.3 percent and Frankfurt was 1.5 percent down. This situation is no longer sustainable.
"We appreciate it. They fought World War I with us, and we appreciate it, but we're protecting each other", he said before lashing out at NAFTA and Canadian tariffs on U.S. dairy products. The S&P 500 index closed down 11.16 points at 2,762.59 and the Nasdaq composite index was down 21.44 points at 7,725.59.
"History shows that there are various other measures [China] could take to inflict pain on USA companies. including scaled up health, safety and tax checks, delaying the imports of goods, and boycotts", warned Louis Kuijs, the head of Asia economics at Oxford Economics. "President Trump has a great relationship with President Xi" Jinping of China.
"American businesses now are on a level-playing field with your competitors from other countries who have so many advantages, including subsidy by governments", he said.
One investor noted the brinksmanship of Trump's strategy.
For example, let's say for arguments sake that a 10% tariff is placed on the iPhone.
As the trade row between the United States and China escalates, Beijing is preparing retaliatory tariffs targeting energy, one of America's most lucrative export sectors. "Like five times more". That follows brisk selling in global markets.
The declines weighed on the S&P industrials index.SPLRCI, which fell 2.1 percent, its biggest one-day percentage drop in almost two months. The Dow briefly dropped below its 100-day moving average but rebounded, though the index ended the session below its 50-day moving average.
Later on Friday, China announced its own tariffs on American goods, including a wide range of seafood and agricultural products, many cars and trucks, petrochemicals and an array of medical equipment.
China's tariff threat caught U.S. producers off guard because it had been discussing buying more USA energy and agricultural products to reduce its US$375 billion trade surplus with the United States. But last week, Trump unveiled a revised list that included several categories of chips, raising fears that tariffs could impact the USA technology sector.
Yesterday the Shanghai Composite Index slid nearly 5 per cent after Trump upped the ante in his trade dispute with the world's second-largest economy.
Beijing said it would impose a 25 per cent tariff on imports of U.S. crude, natural gas and coal on July 6 if Washington went ahead, as planned, with its own tariffs on Chinese goods that day.
The president has waged a war of words against Canada and Prime Minister Justin Trudeau ever since the Canadian leader criticized Trump's decision to increase tariffs on steel and aluminium, saying it would hurt the economy of both countries. The first round is to take effect on July 6.
The Chinese Commerce Ministry reacted quickly to Trump's announcement, accusing the United States of "extreme pressure and extortionist behavior" and warning it would "strike back hard".
"If the US becomes irrational and issues this list, China will have no choice but to adopt strong countermeasures of the same amount and quality", the Chinese Commerce Ministry said.
The US imports about US$505 billion a year in goods from China.
US stock markets are set for a sharply lower open as tensions over trade between the USA and China seem closer to a boil. "In the near-term, we would expect to see volatility in markets as they attempt to price in the net impact of tariffs", said Michael Olivia, a financial planner with Westpac Wealth Partners. "The idea that they will knowingly drive the economy into recession seems unlikely".