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Dow plummets 500 points after China announces new tariffs

Dow plummets 500 points after China announces new tariffs

China wasted no time in firing back with 25 per cent tariffs on imports of 106 US products covering everything from soybeans, automobiles, chemicals and aircraft.

China imports $14 billion worth of soybeans every year from the US, using much of it to feed its growing pork industry.

These large, global USA companies do a lot of business in China and overseas, which makes their sales and profits vulnerable if the two countries can't work out a deal before the threatened tariffs, which are still under review, go into effect.

"We understand some big-picture concern but it appears to us that the specific proposals from China this morning are calibrated carefully to avoid a major impact on Boeing and are therefore intended more as a message to the USA administration that additional trade barriers will be met with an escalating response", said JPMorgan analyst Seth Seifman.

"We regret that soybeans are on the list".

Unlike Washington's list, which was filled with many obscure industrial items, China's list strikes at signature US exports.

Chinese cyber activity has long posed a challenge for the USA government, which has sought to crack down on Chinese efforts to break into US corporate networks for commercial gain.

However Adams said that there was good news for food producers, as the Chinese government proposed duties on imported beef, but not pork or chicken.

Instead, the Chinese retaliation list, published swiftly on Wednesday afternoon before a two-day Chinese public holiday for Tomb Sweeping, has returned fire on Trump's tough negotiating tactics.

Last year, the US ran a $375 billion trade deficit in goods with China.

Japan was also hit with these tariffs, while most countries got a temporary exemption. The president's recent trade actions, which also include duties on steel and aluminum, have provoked concerns of a global trade war.

"As the Chinese saying goes, it is only polite to reciprocate", said a statement from the Chinese embassy in Washington, DC. "It serves neither China's interest, even less, the interest of the global economy".

"Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion".

The biggest worry for investors is that an escalating trade war will derail a global economy that is largely growing in unison.

Shi Yinhong, a professor of worldwide affairs at Renmin University in Beijing, said that China's move has signaled the country's willingness to go "tit for tat" in a trade war.

After plunging 501 points at the open, the Dow Jones industrial average finished with a gain of 230 points, or about 1 percent. "We're not really reacting to market fluctuations".

"I think the market is beginning to understand and remember that Trump's bark is much bigger than his bite", says Lindsey Bell, investment strategist at CFRA, a Wall Street research firm.

The prospect of a drawn-out trade war with China, the world's second largest economy and the top consumer of many raw materials, tends to weigh on commodity prices.

Executive director John Ross said tariffs could change flows of exports but is unlikely to have an impact on prices.

Stock markets in Europe fell, with investors taken aback by the speed of China's response.

The Chinese yuan also suffered its biggest daily fall against the dollar in two weeks after the measures were proposed.

Among refined products, Nymex reformulated gasoline blendstock -the benchmark gasoline contract-rose 0.27 cent, or 0.1%, to end at $1.9768 a gallon, while heating oil futures fell 1.77 cents, or 0.9%, to $1.9773 a gallon.

The U.S. tariff recommendations put a "strong focus on industrial inputs".

U.S. soybeans sold to China account for 62 per cent of its total soybean exports, with 32.85 million tonnes of soybeans exported to China a year ago, or 34.4 per cent of China's total imports, Zhu said.

Chinese premier Li Keqiang said last month that China would improve conditions for foreign companies, bringing down overall tariffs for imports, and open up manufacturing to foreign investors with no requirement for technology transfer.

China denies that it engages in unfair or illegal activities.

"History is not kind to those who do it. History says all sides lose in trade wars". Trump and his allies want China to treat United States companies operating in the country the same way Chinese businesses are treated in the US-or else face restrictions.

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