The Sino-US trade tensions have gone from simmering lightly to full on blaze overnight after President Trump decided the US will start charging a 10% tariff from September on those $300 billion of Chinese goods that are currently being imported into the US without a levy. He also said that these tariffs could be raised to 25% at a later stage. It did not take long for China to promise that it will bring in countermeasures on a similar scale although it didn’t specify yet what those measures will be.
Caught in the crossfire European markets plunged on opening with the FTSE dropping 1.78% and the heavily China-exposed DAX falling 2.3%. The German index could end up having an even worse day later when President Trump is due to make an announcement about European trade. Given the President’s less than conciliatory mood it is likely that the threatened tariffs on European Union cars, Airbus and food and alcohol could be back on the agenda.
... meanwhile back at home
The Conservative Party’s loss in a local election in Brecon and Radnorshire has now cut the Tory party majority in Parliament to one which will make the already fraught Brexit discussions among MPs yet more difficult and the outcomes more uncertain. After a dense set of declines the pound is for the moment just bumping along, close to unchanged against the dollar and down 0.11% against the euro. August trade is beginning to assert itself in terms of declining volumes and slightly lower volatility.
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