Stocks swoon on a costly economic divorce between the US and China
China’s announced a 34% retaliatory tariff on the US, sending both US-traded Chinese ADRs and US stocks exposed to China sharply lower.
It hasn’t always been an easy relationship. But President Trump’s announcement of a 54% tariff on Chinese goods Wednesday effectively signaled an end to the half-century economic relationship between China and the US that has been a cornerstone of world growth for decades.
China responded on Friday, announcing a 34% tariff on all US goods effective April 10, as well as export curbs on so-called rare earth minerals that are important for tech and defense industries.
Stocks worldwide find themselves caught in the crossfire, with American giants like Apple, Tesla, and others that sell a lot of products in China getting hammered over the last two days.
At the same time, major Chinese companies whose shares trade in the US as depository receipts, including behemoths Alibaba and Baidu, are also deeply in the red.
Long story short, while there might be some hope among investors that the Trump administration could negotiate or soften its stance on tariffs, the stock market is already already pricing in a contentious separation of the world’s top economic powers.
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