China said it would raise tariffs on $60 billion worth of US goods from June 1. That comes after the United States hiked tariffs from 10% to 25% on $200 billion worth of Chinese exports on Friday following a breakdown in trade talks between the world’s top two economies. Retaliation by China came as little surprise. Larry Kudlow, President Donald Trump’s top economic adviser, said Sunday that US officials expected China to retaliate for the tariff hike the Trump administration imposed last week. China will “never yield to external pressure” and is determined to protect its rights, a spokesperson for the Ministry of Foreign Affairs, Geng Shuang, said earlier Monday. Asian stocks dipped lower on Monday, with Japan’s Nikkei Index (N225) dropping around 0.7% and the Shanghai Composite Index (SHCOMP) closing more than 1% lower. Hong Kong markets were closed for a holiday. Major European markets like the DAX (DAX) and CAC40 (CAC40) fell more than 1% on Monday. Stocks in Germany, which exports heavily to China, were among the hardest hit. BMW (BMWYY) and Volkswagen (VLKAF) both dropped around 1.5%, Daimler (DMLRY) fell 3.3% and ThyssenKrupp (TKAMY) closed 8.3% lower. Losses on the FTSE 100 (UKX) were narrower, as rising oil prices gave a lift to BP (BP) and Shell (RDSA). US stock opened sharply lower after the Chinese announcement. The Dow lost more than 600 points on Monday morning, while S&P 500 was 2.4% lower and the Nasdaq lost 3.3%. Wall Street investors fear an escalating trade war in which both the United States and China continue to raise tariffs. US businesses that import Chinese goods pay the tariffs levied by the United States. Companies either eat that cost, which pinches their profits; or they pass the cost onto consumers, which can hurt demand for their products.
Dow Jones futures and global stocks drop as US China trade war escalates
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