Chinese Markets Unfazed by US Tariff Hike Amid Trump's Threats on Trade

Chinese Markets Unfazed by US Tariff Hike Amid Trump's Threats on Trade © AP Photo / Color China

Washington's move to raise tariffs from 10 percent to 25 percent on $200 billion worth of Chinese goods took effect on Friday, with Beijing expressing its disapproval of the decision and warning that it would be forced to retaliate.

News of a fresh spike in US tariffs on Chinese imports had little impact on Chinese stocks and the yuan, which ended on a high note in Friday trading, China Daily has reported, citing market data.

The benchmark Shanghai composite index rose 3.1 percent to 3,939.21 points, with the Shenzhen component and composite jumping by 4.03 percent and 3.8 percent, respectively, closing at 9,235.39 and 1,568 points, respectively. The ChiNext index, China's NASDAQ-equivalent style board of growth enterprises gained 4.38 percent, closing at 1,533.87 points.

China's yuan faced more modest gains, climbing 0.2 percent to 6.81 per dollar but still down 1.13 percent for the week, its worst performance against the US currency since July 2018.

The gains, which followed a slump earlier in the week which saw the Shanghai composite index and CSI300 blue chip index lose between 4.5-4.7 percent of their value, were said to have been led by the technology sector, including 5G Wireless technology, homegrown microchips and software.

However, Jasper Lawler, head of research at London Capital Group, attributed the gains to expectations that Chinese and US officials would return to talks on Friday. "The fact that the two sides have agreed to continue negotiations on Friday is offering a glimmer of hope that the relationship between the two powers hasn't deteriorated beyond repair," Lawler said, speaking to Reuters.

For his part, Dennis Lam, an equity analyst at UBS in Hong Kong, said the market has already "partially factored in [an] increase in tariffs from 10 to 25 percent" after having "a couple of days to look at this scenario. More importantly, these negotiations are still ongoing. There is no concrete evidence that things will get a lot worse," he added.

Jim McCafferty, head of Asia research at Nomura Securities, told CNBCthat he expected the Chinese government to "get a little bit bored with these antics" by the US, "because China's government is really about planning. It's very hard to plan when you've got this erratic partner in the US which is changing its mind every few days."

Fresh US tariffs targeting $200 billion worth of Chinese exports to the US took effect on 12:01 ET on Friday, with the Chinese government expressing "deep regret over the development" and promising to take the "necessary countermeasures,"without specifying what these might be.

In a press statement, China's Ministry of Commerce expressed hope that the US "will meet us halfway and work with us to resolve existing issues through cooperation and consultation".

Meanwhile, Vice Premier Liu He, China's top trade negotiator, will take part in a second day of talks with US officials on Friday. Earlier, Liu said he hoped "to engage in rational and candid exchanges with the US side" on the subject, adding that raising tariffs was not a solution.

Trump Reiterates Threat to Put Tariffs on All Chinese Goods

On Friday morning, President Trump tweeted that the US had begun a process "to place additional tariffs at 25% on the remaining $325 billion dollars" of China's trade with the US, while emphasising that "talks with China continue in a very congenial manner," and arguing that the tariffs had an automatic benefit for the US.

….agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance. In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!

                       — Donald J. Trump (@realDonaldTrump) 10 мая 2019 г.