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US stock futures drop as US plots fresh China tariffs

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)

As the US trade war against China escalates to unprecedented levels with the Trump administration announcing extra tariffs on $200 billion of imports from China, US stock futures are starting to slide.

Futures on Wednesday for the S&P 500 are down 0.7 percent while those for the Dow Jones Industrial Average and the Nasdaq 100 both dropped 0.8 percent. The Wednesday numbers are all an hour before the opening bell, so by the end of the day a sharper decline might be looming.

The decline could be in part due to a sharp selloff in Chinese and Hong Kong stocks on Wednesday. European stocks posted smaller drops, although those more exposed to China’s economy and the trade dispute such as metals saw a sharper decline.

US chipmakers were among the biggest losers in pre-market trade. Advanced Micro Devices, Nvidia and Micron Technology were all down more than 1 percent amid fears that China would retaliate by banning these companies, whose memory chips are used in many smartphones, computers and other devices from China.

A trade war begins

Friday last week, US President Donald Trump carried his protectionist promises to another level and slapped tariffs on more than $34 billion worth of Chinese products.

This was just the beginning. Trump threatened another $500 billion worth of Chinese goods with tariffs if China retaliates. On Thursday of the same week, Trump said that initially, "34 [billion], and then you have another 16 in two weeks and then as you know we have 200 billion in abeyance and then after the 200 billion we have 300 billion in abeyance. Ok? So we have 50 plus 200 plus almost 300."

Then the Trump administration announced on Tuesday that it would slap 10-percent tariffs on the extra 200 billion dollars worth of Chinese imports.

It released a list of thousands of Chinese imports — including food products, chemicals, coal, steel, and aluminum — that would be targeted by the planned tariffs.

Products ranging from car tires, handbags, suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper, and hundreds of food and beauty products are also included.

In an attempt to justify the unusually high tariffs, the US has accused China of undertaking “unfair practices” in trade.

But Trump has also waged trade wars with the US’s natural allies Europe and Canada. He has already started charging levies on the imports of steel and aluminum from the European Union, Mexico, and Canada.

China has imposed tariffs on US cars and major agricultural goods, such as soybeans and meat, in response to the previous rounds of US measures.

Washington’s latest proposal would be the third wave of tariffs against Chinese goods and will go into effect sometime after August 30.

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