The fragile truce in the US-China trade war has been shattered. A fresh and defiant war of words, backed by a new wave of trade restrictions, has erupted between the world’s two largest economies, sending a powerful tremor of fear through Asian markets on Monday.
The renewed tensions have triggered a sharp and widespread sell-off, a direct and painful echo of Friday’s brutal session on Wall Street.
The pain is being felt across the region. Hong Kong’s Hang Seng index has declined 2.22 percent, while mainland China’s CSI 300 has traded 2.73 percent lower.
The damage is not confined to China, with South Korea’s Kospi plunging 2.35 percent and Australia’s ASX/S&P 200 losing 0.68 percent, a clear sign that the contagion of fear is spreading.
A ‘textbook double standard,’ a defiant Beijing
The latest chapter in this long-running saga was ignited on Friday, when President Donald Trump, in response to new Chinese export controls on rare earth minerals, vowed to impose a “massive increase” in retaliatory tariffs.
The threat sent US markets into a tailspin, wiping out 2 trillion dollars in market value.
On Sunday, Beijing delivered its defiant response. A spokesperson for China’s Ministry of Commerce declared “we are not afraid of” a trade war and accused the US of a “textbook double standard.”
This powerful rhetorical escalation has convinced the market that China is now prepared to push for greater concessions from the US, a stance that has been noted by analysts at Goldman Sachs.
The Trump whiplash
Adding a layer of profound and almost surreal uncertainty to the crisis is the erratic nature of the US president’s own statements.
After triggering a global market rout on Friday with his threat of a “massive increase” in tariffs, Trump appeared to completely reverse his stance in a Truth Social post on Sunday.
“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I,” Trump wrote.
The U.S.A. wants to help China, not hurt it.
This presidential whiplash, from a declaration of war to an offer of help in the space of 48 hours, has left investors struggling to find a clear signal.
A cautious start on a bruised Dalal Street
This global turmoil has finally broken the bullish spell on Dalal Street. After two straight weeks of powerful gains, the Indian benchmark indices Sensex and Nifty are poised to begin the new week on a muted and cautious note.
The GIFT Nifty is indicating a subdued start to the session, a sign that the gains from last week, which saw the Nifty 50 log its best weekly performance in over three months, are now very much at risk.
The storm clouds of the trade war have gathered once more, and the market is bracing for the fallout.
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