NEW YORK (Reuters) – On Friday, U.S. President Donald Trump announced an escalation in economic tensions with China by raising tariffs on imports from China to 100%. He also revealed his intention to implement export controls on “any and all critical software,” citing China’s recent restrictions on exporting rare earth minerals vital for technology and other manufacturing sectors as a motivating factor.
Earlier statements indicated that he sees no necessity for a scheduled meeting with President Xi Jinping in two weeks, contributing to a decline in the value of the dollar, U.S. stock prices, and prompting investors to seek refuge in safe-haven assets like Treasuries.
This week, China imposed stricter controls on the export of essential rare earth materials and additionally announced that starting October 14, U.S. ships would incur additional port fees.
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“Here we go again. Engaging in trade negotiations via social media can cause significant disruptions in the markets, but circumstances can evolve rapidly. By establishing a November 1st date for tariff implementation, there is ample time for discussions to occur rather than merely exchanging press statements. The threats to economic growth and inflation risks are elevated compared to just 12 hours ago, yet these risks are not necessarily inevitable.”
CLAYTON TRIICK, HEAD OF PORTFOLIO MANAGEMENT FOR PUBLIC STRATEGIES AT ANGEL OAK CAPITAL, ATLANTA:
“It seems a bit premature to consider this a significant bubble. Volatility has remained quite low due to the government shutdown and lack of data, and I believe volatility should be more pronounced. This situation needed a catalyst, and it appears this is the trigger for a repricing of values.”
“Concerns around labor and inflation persist, and given the absence of volatility and the automatic purchasing of equities last week, I anticipated that if there was clarity around the government reopening in the U.S. today, it might result in a sell-off triggered by newfound data influx and market awakening. However, we received the headline on Trump’s stance early on regarding China.
“I think this volatility was necessary. I wouldn’t characterize it as the onset of a major sell-off. There’s still a considerable amount of cash available to invest in the market, so I doubt we would see sustained downward movements. However, I wouldn’t be surprised if equities traded sideways for some time; I don’t foresee a significant rally at the moment.”
ANSHUL SHARMA, CHIEF INVESTMENT OFFICER, SAVVY WEALTH, NEW YORK:
“Today’s drastic market downturn highlights renewed anxiety over escalating trade conflicts between the U.S. and China, especially in light of the potential substantial tariff increase and the recent cancellation of the meeting with President Xi. These actions introduce considerable risk to global supply chains, corporate profit margins, and investor confidence.”
