Miners lead FTSE lower as Trump’s China tariffs hit outlook

President Trump is ratcheting up trade tensions with China, threatening to increase proposed tariffs on Chinese imports from 10 percent to 25 percent.

The higher tariff rate, if implemented, would apply to a list of goods valued at US$200 billion identified by the USTR last month as a response to China's retaliatory tariffs on an initial round of United States tariffs on US$34 billion worth of Chinese electronic components, machinery, autos and industrial goods.

WASHINGTON-A business group made up of the CEOs of 200 of America's largest companies is urging the Trump administration to stop insisting that Beijing reduce its trade gap with the USA and focus instead on pursuing changes to Chinese tariffs, investments and regulations.

The USTR said it will extend a public comment period for the US$200 billion list to Sep 5 from Aug 30 due to the possible tariff rate rise.

Washington wants China to open its market more to USA products and stop harming American workers, one official said, speaking on condition of anonymity. Beijing immediately imposed retaliatory levies in the same amount on USA imports.

Much of American industry and many members of Trump's own Republican Party have expressed outrage but have so far been unable to thwart his trade policies. If the United States takes further escalatory steps, China will inevitably take countermeasures and we will resolutely protect our legitimate rights.

"If the United States takes further measures that escalate the situation, China will definitely fight back", said Geng. We and the U.S. rate market expect the Fed to slow the pace of rate hikes in 2019 as the U.S. economy is likely to slow as the boost from late cycle fiscal stimulus fades. The U.S. exports goods to China amounting to $130 bln, so it is unlikely that it will be able to respond with a proportionate expansion.

In response, Chinese authorities have warned the USA against "blackmailing and pressuring", and vowed to hit back if its hawkish partner takes further steps to hinder mutual trade.

The proposed increase drew criticism from industry groups like the National Retail Federation, which said the move would ultimately hurt USA consumers.

American plans to escalate a trade dispute with China have unnerved global stock markets.

Lighthizer claimed that Washington has joined forces with like-minded partners around the world "to address unfair trade practices such as forced technology transfer and intellectual property theft, and we remain ready to engage with China in negotiations that could resolve these and other problems detailed in our Section 301 report".

The next wave of US tariffs is set to kick in as soon as Wednesday, with the possible imposition of duties on another $16 billion of Chinese imports.

"US pressure and blackmail won't have an effect". China responded by implementing its own penalties on US goods.

"The news that Washington was planning to increase tariffs on Chinese goods was already making traders nervous ahead of the Fed and has been a source of USDJPY weakness", says Joel Kruger, an FX strategit at LMAX Exchange.

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