Markets fell sharply today as traders nervously await Donald Trump’s press conference in which he is expected to renew his trade war on China.
Yesterday President Trump said he would make an announcement about China on Friday, although he offered no details. He is expected to come down hard on the world’s second largest economy.
It is understood the President is looking at a number of measures as for weeks the administration has been ratcheting up pressure on Beijing over its alleged cover-up of early coronavirus cases.
Trump has publicly blamed China both for the virus and for its damage to the US.
Beijing in turn has retaliated, suggesting the virus originated in US service members, a claim widely refuted by international health experts.
Measures could include expelling thousands of Chinese graduate students enrolled at US universities. He is also looking at travel and financial sanctions against Chinese officials for their actions in Hong Kong.
He said yesterday: “We'll be announcing what we're doing tomorrow with respect to China and we are not happy with China. We are not happy with what's happened. All over the world people are suffering, 186 countries. All over the world they're suffering. We're not happy.”
The comments have sent global markets into the red, with the FTSE 100 in London down 61.88 points at 6160.01. Overnight markets in Asia fell, while in Europe the stock markets in Paris and Frankfurt were both down over 1%.
Neil Wilson, analyst at Markets.com, said: “We are seeing a ramp up in US and China tensions. The press conference today will likely see Trump increase the war of words with China but he could go further and announce further sanctions on individuals and trade.”
Up until recently Trump had made positive steps in his dealings with China. In January he signed a Phase One trade deal and officials say he is aware that he needs China for a full US economic recovery after the coronavirus pandemic.
But in the past week relations have quickly soured.
The major turning point has been a Chinese security law that threatens the long-standing independence of Hong Kong.
The law was formally approved yesterday by China’s People’s Congress and it will ban political protest.
Fears are mounting that Hong Kong could lose its autonomous status, jeopardizing the former British colony’s trade relationship with the United States, which has so far meant that Hong Kong has been spared punishing tariffs that are a hallmark of Trump’s trade war with mainland China.
Trump could also sign a bill today identifying Chinese government officials who the US believes are responsible for the forced detention of up to 2 million ethnic Muslims, known as Uyghurs, in Xinjiang.
Michael Hewson, analyst at CMC Markets, said: “If President Trump signs off on that bill as well as implementing further measures that might hint that the US is keen to send the Chinese a message.”