Markets plunge after Trump threatens new China tariff hike

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BANGKOK (AP) — World markets swooned Monday after President Donald Trump threatened to increase tariffs on imports from China at a time when investors were expecting trade tensions to subside.

The CAC 40 in France lost 2.2% in early trading to 5,428.65 while Germany’s DAX skidded 2.1% to 12,150.16. London’s markets were closed for a bank holiday.

The future contract for the Dow Jones Industrial Average gave up 2% to 25,981.00, while that for the S&P 500 lost 1.9%, to 2,892.50.

Markets opened sharply lower after Trump said via Twitter that he planned to raise tariffs on imports from China to 25% from 10% as of Friday. Complaining that trade talks with China were moving too slowly, he also said he would impose tariffs on $325 billion worth of products from China, accounting for all of its exports.

Trump said “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”

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The Shanghai Composite index closed 5.6% lower at 2,906.46 after plunging more than 6% earlier in the session. Hong Kong’s Hang Seng index sank 2.9% to 29,209.82.

Trump’s comments in tweets Sunday came as a Chinese delegation was due to resume talks in Washington on Wednesday aimed at resolving a tariffs battle that has rattled world markets.

The Wall Street Journal, citing unidentified sources, said China’s government was considering canceling this week’s talks. But a Chinese Foreign Ministry spokesman, Geng Shuang, said Monday that the delegation was still planning to go. He would not say exactly who might attend the talks.

In other trading, the A-share index on China’s smaller market in Shenzhen plummeted 7.4 percent. Japan’s markets were closed for a holiday, but the future contract for the benchmark Nikkei 225 index lost 2.4%.

Shares also fell sharply in Taiwan, Singapore, Australia and Indonesia.

Many market players had anticipated news of a possible deal as early as this week in the dispute over Chinese industrial policies and technology. Analysts said Trump’s comments might be a negotiating tactic, but might also make Beijing reluctant to appear as if it was giving in to U.S. demands.

“He (Trump) is trying to show the Chinese a little color, maybe a little punishment. Of course, the effect is catastrophic,” said Francis Lun, a stock analyst based in Hong Kong.

Chris Weston of Pepperstone said markets had been treated to a “genuine shock.”

“However, today’s comments hit us at a time when most were expecting some sort of market-friendly resolution to be formally announced in the next two weeks,” he said.

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The revived tensions over trade pulled oil prices lower. Benchmark U.S. crude shed $1.26, or 2%, to $60.68 per barrel in electronic trading on the New York Mercantile Exchange. It gained 13 cents to $61.94 per barrel on Friday.

Brent crude, the international standard, gave up $1.19, or 1.7%, to $69.66 per barrel. It rose 10 cents on Friday to $70.85 per barrel.

In currency trading, the Japanese yen, viewed as a safe haven for investors, advanced against the U.S. dollar. The greenback was trading at 110.74 Japanese yen by midday Monday, down from 111.11 yen on Friday.

The euro weakened to $1.1185 from $1.1200 on Friday.

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Associated Press writer Alice Fung contributed from Hong Kong.

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