Trump tariffs reside: China shocked by JD Vance calling its staff ‘peasants’ as 104% levy comes into pressure
China has reacted with shock as the Trump administration called its workers “peasants” and slapped the country with an eye-watering 104 per cent tariff on almost all imports.
Donald Trump’s full list of “reciprocal” tariffs has now come into effect, causing Asian markets to tumble on Wednesday as even the US’s closest allies in the region were hit with hefty new duties.
JD Vance made the insulting “peasants” remark in an interview on Fox News last week, in which he complained that America “borrow[s] money from Chinese peasants to buy the things those Chinese peasants manufacture”.
A Chinese government spokesperson said it was “surprising and sad to hear the vice president say such ignorant and impolite words”.
The escalating trade war between the world’s two largest economies has shaken global markets, prompting a widespread sell-off and rattling investor confidence.
Consumers in the US are likely to be among the hardest-hit, with companies expected to pass on any new import tariffs to their customers. In Walmart, Americans were seen stockpiling basic goods like canned food and packets of juice, telling a Reuters reporter it reminded them of Covid-era panic buying.
British banks suffer as prospect of global recession looms
Once again, British banks are taking a battering in the morning markets.
Barclays (-3.6pc), Standard Chartered (-3.6pc), HSBC (-3pc), Lloyds (-2.5pc) and Natwest (-2.5pc) are all suffering – it’s worth noting there’s multiple layers to financials taking a hit.
Firstly, of course, there’s the prospect of a global recession looming; when people have less money to spend and businesses don’t do as well, those who move and lend the money naturally stand to make less of it themselves too.
Secondly, there are growing calls for the Bank of England to make pretty significant cuts to the base interest rate next month, which in turn will squeeze profit margins that banks have been used to over the past year or two.
Lloyds, as an example from those above, is far more domestic-focused than Standard Chartered, so a wider-impacting downturn will affect those international banks more severely and so far at least it appears Asia may be expected to suffer more than the UK too, which partly explains SC being down 26pc over the last month while Lloyds is ‘only’ down 8pc over the same timeframe.
British gilt yields reach highest point since 1998
British long-dated gilt yields have reached their highest point since 1998 while the FTSE 100 slumped in response to President Donald Trump imposing his latest round of tariffs.
The yield on a 30-year UK gilt hit 5.518 per cent on Wednesday morning, up 16 basis points and surpassing a previous 27-year high of 5.472 per cent set in January.
The movement followed on from a sharp rise in 30-year US Treasury yields overnight and comes amid rising bets from investors that the Bank of England will cut rates faster than previously expected this year.
Shorter-dated 10-year gilt yields were slightly higher at 4.69 per cent while two-year yields ticked down at 3.92 per cent.
The FTSE 100 was down 2.47 per cent, or 195 points, at 7,715, on Wednesday morning.
Watch: Trump mocks world leaders as he claims they’re begging for deal on tariffs
This stock market crash isn’t the worst we’ve ever seen – but it could be the most dangerous
It is true that since Donald Trump’s inauguration, the world order has been changing. Geopolitics remain a concern, with conflicts unresolved in Ukraine and in Israel/Gaza. America’s proposed reductions in its contributions to Nato financing, and its withdrawal from the World Health Organisation and the Paris Agreement on climate change, have meant that other countries have had to rethink their spending and their roles in sustaining the world order as we knew it.
Trump has also paused US funding to the World Trade Organisation, which oversees global trade rules to prevent unfair practices and to adjudicate trade disputes. This week’s escalating trade war has sent a shock through the system, with many countries – and businesses – left trying to reposition themselves.
It is affecting the US market, too. The markets, which had rallied since Trump’s win in November last year, have now tumbled, as have stock markets across the globe. More than $5 trillion (£3.9 trillion) has been wiped off, and the S&P – the stock market index that tracks the performance of 500 companies listed on US exchanges – has lost around 10 per cent of its value over the last three days of trading. Even though this has now stabilised, we are back to levels seen a year ago, wiping out all the gains made in between.
Read the full analysis here:
EU countries set to approve first retaliation against U.S. tariffs
European Union countries are expected to approve on Wednesday the bloc’s first countermeasures against Trump’s tariffs, joining China and Canada in retaliating and escalating a conflict that could become a global trade war.
The approval will come on the day that Trump’s “reciprocal” tariffs on the EU and dozens of countries took effect, including massive 104 per cent duties on China, extending his tariff onslaught and spurring more widespread selling across financial markets.
The 27-nation bloc faces 25 per cent import tariffs on steel and aluminium and cars as well as the new broader tariffs of 20 per cent for almost all other goods under Trump’s policy to hit countries he says impose high barriers to U.S. imports.
The European Commission, which coordinates EU trade policy, proposed on Monday extra duties mostly of 25 per cent on a range of U.S. imports in response specifically to the U.S. metals tariffs. It is still assessing how to respond to the car and broader levies.
The imports include motorcycles, poultry, fruit, wood, clothing and dental floss, according to a document seen by Reuters. They totalled about 21 billion euros ($23 billion) last year, meaning the EU’s retaliation will be against goods worth less than the 26 billion euros of EU metals exports hit by U.S. tariffs.
China plans high-level meet to craft support measures after US tariff hikes, say sources
China’s top leaders plan to meet as soon as Wednesday to hammer out measures to boost the economy and stabilise capital markets as trade war with the United States escalates.
Economists have warned that the fusillades on trade could shave one to two percentage points off growth this year in the world’s second largest economy, worsen industrial overcapacity, put domestic jobs at risk, and further fuel deflationary forces.
The planned high-level gathering is the first to become publicly known since U.S. President Donald Trump clamped “reciprocal” tariffs on China last week, and follows Wednesday’s near doubling to 104 per cent in U.S. duties on imports from China.
Those expected to attend included senior officials from the State Council, or cabinet, as well as several government and regulatory bodies, said the two sources, who sought anonymity as they were not authorised to speak to the media.
The policymakers were expected to discuss measures to boost domestic consumption and support capital markets in China, the sources said.
Initiatives such as making rebates on export tax more attractive for domestic companies were also likely to figure in the talks, one of them added.
German engines maker Deutz will pass US tariffs on to customers, CEO says
Germany’s Deutz, whose engines go into farming and construction vehicles, said it plans to fully add tariffs to prices it charges U.S. customers, partly because many of the group’s rivals are also based outside the United States.
“It will have the effect that everything will be passed along to customers,” CEO Sebastian Schulte told journalists at a press briefing late on Tuesday, adding that smaller rival engines are manufactured in Japan and Britain.
Rachel Reeves to meet with Indian counterpart to ‘secure new trade deal
Amid the ongoing market turmoil and uncertainty about global trading relations, Chancellor Rachel Reeves has said the UK is “accelerating trade deals with the rest of the world” as she prepares to meet her Indian counterpart.
Ms Reeves will meet Nirmala Sitharaman alongside Trade Secretary Jonathan Reynolds later on Wednesday for talks aimed at securing a deal with India.
The UK has been through more than a dozen rounds of talks since 2022 over a potential agreement with India, which is forecast to become the world’s largest economy.
Key sticking points were said to include visa rules for Indian students and professionals, as well as access for British service firms.
The Chancellor said: “In a changing world, this Government is accelerating trade deals with the rest of the world to back British business and provide the security working people deserve.
“We are going further, faster to create the best possible conditions for British business by working to reduce barriers to trade.”
Discussions with India will focus on areas such as defence and jobs creation, investment and trade opportunities, she said.
World banks scramble to cut rates with Americans likely to bear brunt of trade war
Central banks in New Zealand and India cut rates on Wednesday in what could presage a broader move by policymakers to try and cushion the tariff hit to their economies.
But some economists have warned that ultimately U.S. consumers are likely to bear the brunt of the trade war, facing higher prices on everything from sneakers to wine.
Danish luxury stereo maker Bang & Olufsen said on Wednesday it would raise prices on selected products next month to account for the tariffs and other factors.
Nearly three-quarters of Americans expect the prices of everyday items to rise in the next six months, a new Reuters/Ipsos poll found.
The full effects of Wednesday’s tariffs may not be felt for some time, as any goods already in transit as of midnight will be exempt from the new levies as long as they arrive in the U.S. by 27 May.
Tuesday’s FTSE rise likely to be short-lived as markets continue to tumble
The FTSE has opened more than two per cent down and, clearly, yesterday’s rise is proving an extremely short-lived one. Of the 100 companies in London’s top index, just two – Airtel Africa and BAE Systems – are in the green.
We’ve already seen markets in Asia mostly drop overnight, with the Nikkei 225 down almost four per cent and the Hang Seng 0.4 per cent in the red.
Reuters have reported that yesterday in the US was the first-ever occasion that the S&P 500 opened more than two per cent up, yet finished more than one per cent down. Expect more to come today.
