US markets stutter following China’s halt on US farm purchases
US-China trade war kicks back into gear
The three leading indices all dipped at the start of Monday trading, not in reaction to the widespread civil unrest which bedevilled the world’s largest economy over the weekend but following China’s decision to suspend US farm purchases.
By noon, the Dow Jones (DJIA), Nasdaq and the S&P 500 stood up 0.20, 0.38 and 0.16 per cent, respectively.
Markets had closed on Friday buoyed by the fact that President Donald Trump did not announce a dramatic change in America’s trading relationship with China in his much-anticipated and much-hyped press conference.
The president did pledge to “take action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory” and to impose sanctions on senior figures in Beijing should China continue to pursue its controversial new national security law for the region.
This was enough to evoke a vituperative reaction. The state-backed People’s Daily newspaper stated: “The baton of sanctions that the United States is brandishing will not scare Hong Kong and will not bring China down.”
More importantly, Beijing ordered Chinese companies to stop imports of US farm products. This move is a clear indication that the US-China trade war which so weighed on global trade and growth in 2018 and 2019 is back underway after a short truce.
Any goodwill on show during the January signing of the initial ‘phase one’ trade agreement will likely have evaporated after the Covid-19 crisis, which originated in China, triggered a recession larger than the Global Financial Crisis and a spike in unemployment to levels not witnessed since the 1930s.
In recent weeks, the United States resumed its targeted attempt to limit the growth of the jewel in the Chinese tech crown, Huawei. It closed loopholes and forced manufacturers in third nations, such as Taiwan, to choose sides.
The suspension on US farm purchases is a similarly targeted measure. 2020 is an election year and the policy will hit Donald Trump electoral base in the agricultural heartland hardest.
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