Wall Street equities plunged at the start of trading. The Dow Jones Industrial Average opened with a loss of 88 points and then dropped another 218 points by 14:00 GMT. It was the same story for the Nasdaq and S&P 500, and it may get worse before it gets better. President Trump’s latest China trade comments leave no doubt that his promised tariff increase will go into effect at midnight tonight.
Yesterday, Trump talked trade to reporters saying “you see the tariffs we’re doing? Because they broke the deal. They broke the deal, So they’re flying in, the vice premier tomorrow is flying in – good man – but they broke the deal. They can’t do that, so they’ll be paying.”
The Chinese response lacked the hyperbole of Trump’s message, but it still raised tensions with Beijing stating that “China deeply regrets it, and if the US tariffs are implemented, China will have to take necessary countermeasures.”
China still wants the trade issued settled, but it is unlikely to occur this week. The spokesman for China’s Foreign Ministry said “We hope the US can work with China to meet each other halfway, accommodate each other’s legitimate concerns and strive for a mutually beneficial agreement on the basis of mutual respect and equality. It will serve the interests of both China and the US and is the shared expectation of the international community”.
The US trade deficit widened to $50.0 billion in April, a tad worse than the February result of $49.3 billion but not much of a factor for traders. Canada’s trade deficit narrowed but not as much as expected which is another tick in the negative CAD sentiment box. USDCAD tried and failed to take out resistance at 1.3505, leaving it locked in a 1.3440-1.3505 band, albeit with a bullish bias.
The commodity currency bloc is wilting under the glare of trade tensions. AUD, NZD and CAD extended overnight losses since New York opened and then promptly reversed the move by 14:00 GMT. The reversal was fueled by a wave of US dollar selling against EUR and GBP.