US levies on European and Chinese goods may also break WTO rules, says German leader
The war of words over Donald Trump’s threat to impose wide-ranging tariffs on imports from China and the European Union has intensified after the German chancellor, Angela Merkel, said the levies threatened the incomes of workers across the world.
On Friday, Merkel described possible US tariffs on imported cars as a breach of World Trade Organization rules and “a real threat to the prosperity of many in the world” as Trump went on US television to say that he was ready to expand his roster of tariffs on Beijing to $500bn, covering almost every product imported to the US from China .
Earlier, Trump said on Twitter that the US “should be allowed to recapture what was lost due to illegal currency manipulation and bad trade deals”.
Stock markets slipped back on the news, with the German Dax the worst hit. The Frankfurt-based index tumbled 144 points, or 1.1% to 12,542. The FTSE 100 dropped almost 60 points in response to the tit-for-tat battle before ending the day down just 5 points at 7,678.
The dollar index, a measure of its value against a basket of other major currencies, was down 0.6% after it reached a one year high on Thursday.
For several months the Trump administration has ramped up its campaign to force rival economies to end what it believes are artificial subsidies and restrictive practices that deny US firms access to their markets. Trump has also been angered by central bank policies he says keep rival currencies low compared with the dollar, making US exports expensive.
In his attempts to promote a more favourable exchange rate, Trump rounded on the US central bank, the Federal Resrve, for pressing ahead with interest rate hikes, thereby making the US a more popular destination for global savings and pushing up the value of the dollar.
