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China retaliates with its own threat of tariffs

The Chinese have threated to impose their own tariffs after Donald Trump’s memo.

Earlier today, President Donald Trump signed a memo instructing his officials to draw up a list of Chinese goods that the US could impose a tariff on.

He believes that that this is a ‘reciprocal’ move due to alleged Chinese theft of intellectual property when US businesses have to enter into joint ventures because otherwise they find it very difficult to enter the huge Chinese market.

The US stock market plummeted overnight. The S&P 500 ETF (ASX: IVV) dropped by 2.52%. Investors feared that this would cause a trade war because it could lead to tit-for-tat reactions between China and the US.

As feared, China has fired back with its own list of US products that it will impose tariffs on. China has said that 128 US products could attract a tariff.

Chinese officials said that the country could impose a 15% tariff on products like wine, nuts, dried & fresh fruit, steel pipes and ginseng. China could also impose a 25% tariff on US products like recycled aluminium and pork. The country could also remove concessions relating to US steel and aluminium.

President Donald Trump and President Xi Jinping both don’t seem like the type of people who will back down easily over this issue. In-fact, it’s quite easy to see that thing could escalate in the coming months.

Foolish takeaway

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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