Markets fall as Trump threatens China with tariff increase

Chinese stock markets fell on Monday and Europe follows suit after US President Trump tweeted on Sunday night threatening the Chinese government with an increase in tariffs.

The main Shanghai index was down more than 6% at one point this morning and the Shanghai experienced a 3% cut. London and Japan markets are closed on Monday but it is expected that Wall Street could fall 2% when trading opens later on.

Global financial markets were down this morning as the tweets caught them off guard and the fear of a real trade war sets in.

Trump sent out two tweets on Sunday night that said: “For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars....

“....of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”, he added in the second tweet.

These statements come as the trade talks deemed “productive” by both sides that were closing in on a final trade deal, are close to falling apart.

A Chinese delegation was due to travel to Washington this week for talks aimed at ending the trade war but according to US media, the Chinese government could be considering cancelling those talks scheduled to resume on Wednesday.

"We know from past experience that this could be one of Trump’s infamous negotiating tactics, but there is a good chance that this time it will backfire. China has cancelled Vice Premier Lui He’s trip to Washington for trade talks this week, clearly unimpressed by the prospect of negotiating with a gun held to its head. Suddenly the risk of a full-blown trade war has increased sharply, and the markets are reflecting this, "says Jasper Lawler, head of analysis at the London Capital Group.

Oil prices joined the party and also plunged with falls of 2% after the new threats of Trump. "The prospect that months of trade talks will be disrupted by Trump has raised concerns about the future demand for crude," Lawler added.