Following the implementation of U.S. President Donald Trump’s most recent tariff hikes and his threat to impose further ones, Asian and European stocks fell on Wednesday.
There is a great deal of uncertainty about Trump’s next move in his trade battle. He stated intends to impose pharmaceutical tariffs in order to encourage the production of more drugs in the United States during a speech on Tuesday evening.
One of Trump’s most recent tariffs is a hefty 104% tax on Chinese goods imported into the United States. But on Wednesday, Chinese markets recovered from their early losses.
Driving the gains were massive share buybacks by big state-run investment funds and other state companies that often are instructed to support the market in times of crisis. Investors also are expecting the government to step up spending and other measures to help counter the impact of the tariffs, which will hit small manufacturers and traders that create the most jobs the hardest.
A slew of losses in Asia
Beijing issued a policy paper reiterating China’s right to protect its businesses with unspecified countermeasures, while it emphasized it preferred to resolve trade issues through dialogue.
The paper also argued that taking into account trade in services and U.S. companies’ operations in China, economic exchange between the two countries is “roughly in balance.”
Hong Kong’s Hang Seng rose 0.7%, while the Shanghai Composite index closed 1.3% higher.
Taiwan led the losses in Asia, as its Taiex plunged 5.8%. Big tech industries were among the biggest decliners.
South Korea’s Kospi lost 1.7% to 2,293.70, and the government said it would provide help for its beleaguered automakers.
Slim hopes
In early European trading, Germany’s DAX lost 2.4% to 19,796.83. In Paris, the CAC 40 declined 2.4% to 6,930.62. Britain’s FTSE 100 gave up 2.2% to 7,735.72.
Analysts say the markets will have more swings up and down given uncertainty over how long Trump will keep the stiff tariffs on imports, which will raise prices for U.S. shoppers and slow the economy. If they persist, economists and investors expect them to cause a recession. If Trump lowers them through negotiations relatively quickly, the worst-case scenario might be avoided.
Trump’s trade war is an attack on the globalization that’s shaped the world’s economy and helped bring down prices for products on store shelves but also caused manufacturing jobs to leave for other countries. Trump has said he wants to narrow trade deficits, which measure how much more the United States imports from other countries than it sends to them as exports.
