US Markets Slump As Businesses Fret Over China

Technology stocks and industrial stocks, which do a lot of business with China and would stand to suffer greatly in a protracted trade war, led the way lower on Tuesday.

Apple lost 2.7 percent and United Technologies fell 3.4 cent

The S&P 500 fell 1.7 percent, to 2,884.

The Dow fell 473 points, or 1.8 percent, to 25,965. The Nasdaq fell 2 percent, to 7,963.

President Trump's tougher stance on China is also worrying the US agriculture sector.

On Tuesday, US soy farmers urged Trump to pull back from his tariff threat and quickly bring an end to the trade dispute with China.

Trump has vowed to more than double the tariffs on US$200 billion in Chinese goods starting Friday, after US negotiators accused Beijing of reneging on commitments made during months of talks that aim to reduce the US trade deficit, clamp down on theft of US technology and reduce China's massive subsidies.

American soy farmers have found themselves in the crosshairs of Chinese retaliation, and prolonging the battle will be even more damaging, Davie Stephens president of the American Soybean Association (ASA), said in a statement.

Stephens, a grower from Clinton, Kentucky, said "farmers are in a desperate situation. We need a positive resolution of this ongoing tariff dispute, not further escalation of tensions."

China is a key market for US soy bean exports, but last year sales plunged by about 75 percent compared to 2017 to just over US$3 billion, after China retaliated against US farmers with 25 percent tariffs.

Stephens said prices already are depressed, so "we need the China market reopened to US soybean exports within weeks, not months or longer," and before the 2019 harvest begins in September.

"The financial and emotional toll on US soybean farmers cannot be ignored."

The chemical industry is facing similar difficulties, and also called for the White House to work fast.

"The risks of continuing to use tariffs as a negotiating tactic with China are simply too high -- and any potential benefits still unclear," American Chemistry Council President Cal Dooley said in a statement.

"China supplies the United States with several chemicals which are not available anywhere else and which are critical inputs to US manufacturing," he said, noting that China is also is the number three US export market.

Despite the tougher US rhetoric, China said on Tuesday its top trade negotiator, Vice Premier Liu He, would lead Beijing's delegation to the talks in Washington on Thursday and Friday, a day later than originally scheduled.

"China always believes that mutual respect, equality and mutual benefit are the premise and the basis for reaching an agreement. Adding tariffs will not solve any problem," Foreign Ministry spokesman Geng Shuang said at a regular media briefing.

US officials say the world's two largest economies had been close to an agreement but they claim Beijing reversed course in recent days.

"Over the course of the last week or so, we've seen an erosion in commitments by China, I would say, retreating from commitments that have already been made in our judgment," US Trade Representative Robert Lighthizer was quoted as saying in media reports on Monday.

He said the tariffs would increase at 12.01am (12.01pm HKT) on Friday.

Treasury Secretary Steven Mnuchin described the negotiations as 90 percent complete but told reporters that in recent days the talks had gone "substantially backward," according to the media reports.

The tensions have renewed fears that the trade war could spill over into the global economy.

Speaking in Paris, International Monetary Fund chief Christine Lagarde said "tensions between the United States and China are the threat for the world economy."

Oxford Economics warned that escalating the tariffs to the remaining Chinese goods, which would be expected to spark further retaliation from Beijing, would cut 0.3 percentage points off US growth.

But William Reinsch, a trade policy expert at the Center for Strategic and International Studies, cautioned that China will never meet all the US demands, which complicates Trump's strategy.

"The most important things are the things the Chinese won't give," he told AFP, including reducing subsidies and subjecting state-owned enterprises to market forces.

"The Chinese are not going to do either of those things," so "the path to political victory for him is a narrow one," he said. (AFP, AP)

Last updated: 2019-05-08 HKT 04:29