Singapore stocks extended their slide as trading resumed today (Monday) following Donald Trump’s threat to beef up tariffs on Chinese imports.
The Straits Times Index (STI) fell 3.41 per cent and, in New York, US stock index futures fell on Sunday after Trump yesterday tweeted that he would raise tariffs on U$200 billion worth of Chinese goods to 25 per cent from 10 per cent by Friday, and would soon target US$325 billion more.
Chinese Vice Prime Minister Liu He is due to travel to the United States this week, although his trip is now due to be shortened or possibly cancelled, according to China’s media.
“Trump has taken the proverbial sledgehammer to the walnut this morning … by threatening to slap a 25 per cent tariff on a mind-boggling US$525 billion of Chinese goods by this Friday,” said Jeffrey Halley of Oanda in Singapore.
China’s yuan has plunged, equities tumbled, Treasury futures rose and crude oil prices sank as markets unwound bets on a resolution to a trade war, forcing firms to rethink supply chains. Futures on the S&P 500 Index fell by as much as 2.2 per cent.
DBS analysts said they expected Trump’s tariff tweet to create a “knee-jerk impact” on the markets in a negotiation strategy to pressure Beijing into agreeing to US demands.
On the Singaporean impact, DBS forecast that the risk-off effect should send cyclicals lower, with stocks likely to be down by Wednesday.
A fall on the STI to 3,300 was forecast.
On the Singapore markets, Genting Singapore lost 1.6 per cent with 26 million shares traded and YZJ Shipbuilding fell 1.9 per cent.
Trump tweeted that he would boost tariffs on Chinese goods, hammering global financial markets.
The tycoon turned populist’s Sunday tweet read: “For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars….”
Asia-Pacific investors were surprised by Trump’s tweets amid ongoing trade talks between Beijing and Washington.
“I think this has got the potential to be a real game-changer,” said Nick Twidale at Rakuten Securities Australia.
“There is still a question of whether this is one of the famous Trump negotiation tactics or are we really going to see some drastic increase in tariffs. If it’s the latter we’ll see massive downside pressure across all markets,” the analyst said.
Singaporean exports are dependent on US-Chinese economic relations. Picture credit: Wikimedia