Risk aversion has reared its head in early Asian trade on Friday following news that Donald Trump has asked the US Trade Representative (USTR) to consider an additional $100 billion in tariffs on Chinese imports.
“In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs,” Trump said in a statement released by the White House.
Financial markets have been roiled on the news with US stock futures tumbling more than 1%, completely reversing all of the gains achieved on Thursday on an apparent easing in trade concerns among investors.
The 5-minute tick chart of Dow futures tells the story since the news broke.
The Japanese yen, US bond futures and gold — all safe haven assets — have rallied on the news while the Australian dollar is down by over 0.3%, adding to the losses seen on Thursday.
While some deem recent moves from the US as a negotiation tactic to help reduce trade imbalances between China and the US, it’s clear that investors are growing increasingly nervous about the potential for this tit-for-tat spat to become something far more significant.
If recent form is any guide, China may well announce new proposals of their own on new tariffs in the days ahead.