EU threatens tariffs on more American goods, as US president says Europe is “possibly as bad as China”
Newsflash: American factories are also feeling the impact of Donald Trump’s trade dispute.
Data firm Markit has just reported that US manufacturing growth hit a four-month low last month. New order growth slowed to the lowest rate since November 2017, which American factory bosses blamed on recent tariffs.
US purchasing managers also reported that input prices kept climbing last month. This was due to “greater global demand for inputs and the effects of recent tariffs”, Markit says.
This pulled the US manufacturing PMI down to 55.4 in June, down from 56.4 in May (so showing slower growth).
Donald Trump has argued that US manufacturing will benefit from his actions, as companies will be encouraged to seek domestic alternatives to imported goods (once they incur an extra tariffs).
But Chris Williamson, chief business economist at IHS Markit, says tariffs are having a negative effect on the sector:
DING DING: Wall Street has joined the global selloff at the start of trading in New York.
The Dow Jones industrial average has dropped by 180 points, or 0.75%, at the open to 24,085 points. The broader S&P 500 is also down around 0.7%.
US traders are concerned that the trade dispute between the US and Europe appears to be deepening, with president Trump claiming that the EU was “as bad as China” .
The big concern is that Trump may decide to impose tariffs on imports of cars from Europe (as he threatened last month).
The news that the EU has threatened to retaliate with tariffs on $300bn of US imports suggests that tit-for-tat tariffs could hurt economic growth.
The US commerce secretary has insisted that market volatility won’t deter Donald Trump from shaking up the global trade system.
In an interview with CNBC, Wilbur Ross said the US president was determined to push through changes – even if it creates uncertainty that drags stock markets down.
Ross argued that the US economy is in good shape, with strong capital expenditure and employment growth – and more jobs available than unemployed people to fill them.
Q: But, the markets have fallen in recent weeks as the trade disputes have gathered pace….
Ross suggests the White House isn’t concerned — especially as US stocks have risen so sharply since Trump won the 2016 presidential election.
Q: What if the stock market fell 20% from its highs (the definition of a Bear Market)?
Ross is adamant that there’s no “bright line level” that would force a change of policy.
Ross also played down reports that Trump might yank America out of the WTO. He argues that the WTO itself understands that some reforms are needed, so it’s “premature” to talk about withdrawing from the whole agreement.
