So much for that 300-point rally. Markets are now down more than 250.
All as the trade war just got a bit worse.
On September 1, 2019, the U.S. will be “putting a small additional tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our country,” tweeted President Donald Trump.
“We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one,” he added.
That follows another round of failed talks between China and the U.S.
At the moment, the trade battle between the world’s two largest economies has now dragged on for more than a year and a half. You may remember the U.S. shocked the markets in May after hiking tariffs to 25% from 10% on $200 billion in Chinese goods. China then retaliated and said a trade deal will not be reached unless the existing tariffs were cut.
Now, markets are very fearful that any shot at a trade deal is gone.
It’ll also be interesting to see just how China responds to this latest news. Remember, they’ve already threatened to choke rare earth supply from the U.S.
The last time the U.S. rattled the tariff cage, the China’s People’s Daily reported the country could cut off rare earth minerals. “We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!” the People’s Daily said in a commentary titled “United States, don’t underestimate China’s ability to strike back,” as quoted by CNBC.
Should China cut off rare earth supply, it could be disastrous.
Also remember that China has the largest rare earth mining capacity in the world, especially after the U.S. pulled back from mining. That only increased our dependence on China’s supply. “China, as the dominant producer of rare earths, has shown in the past that it can use rare earths as a bargaining chip when it comes to multilateral negotiations,” said George Bauk, Chief Executive Officer of Northern Minerals Ltd., as quoted by Bloomberg.
It’ll be interesting to see how China responds to the latest news.
It’ll also be interesting to see how companies – already struggling under the weight of the trade war – respond to what could happen next. Stay tuned.