Trump Shakes China Markets as Tariff Calls Destroy Rally
Donald Trump’s 10% additional tariffs on Chinese goods have brought geopolitical risks to the forefront of investors’ minds, prompting the biggest selloff in Chinese stocks in months. Hong Kong’s benchmark mainland stock index fell 3.6%, its biggest drop since Oct. 15, while the onshore CSI 300 Index dropped 2%. The yuan was little changed after the central bank set a stronger-than-expected daily reference rate for the currency in a clear sign of support. Friday’s decline in Chinese stocks at least temporarily halted this year’s rally fueled by optimism over the country’s artificial intelligence capabilities and speculation that Trump’s tariff threats were largely a negotiating ploy. The latest levies announced by the president on Thursday appeared to be a warning that investor sentiment may have become too positive. “The extra 10% is frustrating because it keeps the uncertainty going and increases the risk that this becomes a pattern,” said Billy Leung, an investment strategist at Global X ETFs in Sydney. “The market is tired and fed up with the tariff talk, and now investors are being forced to re-assess.” China has threatened to retaliate against Trump’s trade threats, with a Commerce Ministry spokesman saying the country “will respond with all necessary measures to defend its legitimate rights and interests.”
In addition to the tariff headlines, investors are also focusing their attention on China’s legislative session scheduled to begin next week. The annual meeting, known as the National People’s Congress, is where policymakers typically unveil key economic goals including growth targets.
“We expect the NPC to announce increased government spending to help offset the impact of higher tariffs on U.S. imports from China,” said Kristina Clifton, senior economist at Commonwealth Bank of Australia in Sydney. “An unexpectedly large increase would strengthen the Australian currency, the kiwi and the offshore yuan.”
Source: Bloomberg
