Stock markets across Asia plunged on Monday, sending an early warning sign to U.S. investors. Asian markets often mirror Wall Street, and vice versa. This sets up the market for a volatile week. The loss of confidence is largely being blamed on Trump’s trade comments over the weekend.
Every single major index was down at the end of the day, including the Nikkei (NIK) in Japan, the Shanghai Composite (SHCOMP) in China, and the Hong Kong Hang Seng (HSI). Even Australia’s ASX (AU: ASX) index was affected and was down almost -1.28% at the close of trading.
President Trump Announces Higher Tariffs and Expresses Regret for Not Doing it Sooner
Both China and the United States announced new tariffs over the weekend, indicating that the trade war is far from over.
President Trump said on Friday that he would be applying a 30% tariff on $250 billion of Chinese goods, up from the current 25%. The hike will be applied on October 1.
In addition, Trump still intends to raise tariffs from 10% to 15% on $300 billion of Chinese goods, including consumer electronics, clothes, and toys. The second round of hikes will be applied on December 15.
Trump said in a meeting at the G-7 summit over the weekend that he regretted some aspects of the escalating trade war on China. Some took this to mean that he was second guessing his tariffs. However, the White House later clarified that Trump only “regrets not raising the tariffs higher.”
Trump Trade Orders U.S. Companies to Leave China
Rhetoric will play a big part in investor sentiment this week. President Trump took to Twitter on Friday to ‘order’ U.S. companies to leave China. He announced, “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
The White House later said that the President’s tweet was a suggestion, but that Trump did have the power (through executive order) to enforce corporate actions in the free market.
Investors will not take the latest rhetoric lightly, especially since it is combined with higher tariffs and a worsening relationship with China.
The stock market in the final months of 2019 could very much mirror that of last year, where equities tumbled before recovering after the Christmas break.
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