Sen. Rand Paul, R-Ky., said Sunday that imposing more USA tariffs against China is a bad idea, and he has warned President Donald Trump's administration about the problem. The president also ordered tariffs to be raised on all remaining U.S. imports from China, which are valued at around $300 billion. The rates of additional tariffs on some of the products will now be increased to 25%, 20%, and 10%.
"This just got messier and more expensive to the global economy and until we get break here, markets are going to be under pressure", said Art Hogan, chief market strategist at National Securities in NY.
US officials said the Chinese negotiators have been reversing themselves on commitments made in earlier trade talks.
There were losses across the world after the Chinese Government announced overnight it would impose higher tariffs on a range of U.S. goods in a tit-for-tat retaliation to United States levies on China. The Dow and the S&P 500 each fell more than 2% as investors sold trade-sensitive shares.
Last Monday, China's stock market dropped 5 per cent after Trump announced the tariff hike on Twitter, but for hours Chinese media refrained from reporting the reason for the drop while some online comments were censored.
"Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically".
The S&P 500 on Friday racked up its worst weekly decline since December, as Washington raised tariffs on Chinese goods worth $200 billion to 25 per cent from 10 per cent.
The plunging of the Dow is in response to increasing tensions between Washington and Beijing. That's 70 per cent of the USA economy. "Both sides will pay", he told Fox News.
Trump also defended his administration's trade efforts with China as a model for US negotiations with other nations.
These measures "will get a lot of support in China, but will further undermine business confidence" overseas, said Jake Parker from the US-China Business Council.
The move comes after Beijing threatened "necessary countermeasures" for Trump's tariffs on Friday.
Laptops, tablets and phones may be affected by tariffs on goods imported from China.
After announcing the higher tariffs, the editor of the Communist Party-owned Chinese newspaper Global Times warned Beijing could also hit the U.S. by offloading Treasuries, ending U.S. agricultural purchases and reducing orders for Boeing airplanes.
Paul told ABC, "I know of a big, prominent company in Kentucky that said the tax cuts significantly helped them, but that the tariffs are nearly equal in punishing them". The VIX, however, is still far below the elevated levels it reached at the end of a year ago when the S&P 500 came extremely close to entering a bear market, meaning a decline of 20% or more from a recent peak.
"We're going to take the highest year, the biggest purchase that China has ever made with our farmers, which is about $15 billion, and do something reciprocal to our farmers so our farmers can do well", Trump said while speaking to reporters at the White House.
The United States is pressing China to change its policies on protections for intellectual property, as well as massive subsidies for state-owned firms, and to reduce the yawning trade deficit.