LONDON/NEW YORK (Reuters) -U.S. President Donald Trump on Friday said he is calculating a massive increase in tariffs on Chinese imports, adding there was no reason to meet with President Xi JinPing in two weeks as planned, triggering a sell-off in the dollar.
China this week has tightened restrictions on exports of key rare earth materials and, separately, on Friday said it would impose extra port fees on U.S. ships from October 14.
COMMENTS:
JAMIE COX MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND, VIRGINIA:”All the smart money is scooping up chip stocks on weakness today. Markets were rife for a little sell off, given such outsized gains since April, but, as with tariff month, it’s yet another buying opportunity. The bull market is intact.”
TIM HOLLAND, CHIEF INVESTMENT OFFICER, ORION, OMAHA:
“After months of more good news than bad and more certainty than uncertainty around trade – think the UK, EU and Japan deals and ongoing negotiations with China – today’s developments are a reminder that trade is not fully solved for, and macro and geo-political uncertainty persists. We are hopeful that US/China negotiations will continue and recent moves by both sides will prove to be more about tactics and positioning than not.”
“We don’t think US stocks are in a bubble. That said, stocks have done quite well year to date and trade at elevated multiples. While we are not rooting for a meaningful pullback, any drop should put equities in a more constructive position from a valuation and a sentiment point of view. We would note that it seems to us the Administration has often gotten most aggressive on the trade front after the market has had a strong run, which it has had these past few months.”
MICHAEL ROSEN, CHIEF INVESTMENT OFFICER, ANGELES INVESTMENTS, SANTA MONICA, CALIFORNIA:
“The threat of more tariffs is a reminder that market volatility will remain elevated while Trump is in the White House.”
“The actual tariff rate has been significantly below what was feared, and companies are adjusting to this new era in trade policy. We should expect to see markets back on track after this momentary bout of volatility.”
TOM BRUNI, HEAD OF MARKETS AND RETAIL INVESTOR INSIGHTS, STOCKTWITS, NEW YORK”
“Trump’s actions against China this morning were the excuse the market needed to begin correcting. Over the last week or so, we’ve seen momentum at the index level wane, with bitcoin, the S&P 500, and many leading stocks making marginally new all-time highs before falling back into their ranges. This, combined with the ‘euphoric’ feeling of almost any risk asset investors bought immediately going up, showed that sentiment was due for a reset; the market just needed a catalyst to begin that process.”
GENE GOLDMAN, CHIEF INVESTMENT OFFICER AT CETERA INVESTMENT MANAGEMENT, EL SEGUNDO, CA:
“The news is a surprise because just in two weeks President Trump was going to meet Xi to talk about trade and markets were very optimistic.”
“The markets were fine this morning but with Trump saying that he’s going to massively increase tariffs on China and that he’s also not going to do the meeting in Korea that was supposed to take place with Xi in two weeks, this makes the markets jittery. It adds an additional risk.”
“With equities at high valuations this sell-off, is a sign of jitters. Everything is priced for perfection so the uncertainty increases market jitters. All of this adds uncertainty to economic growth. That’s why we’re seeing treasury yields fall. Oil is selling off too. Anything tied to the economy is weakening.”
JUAN PEREZ, DIRECTOR OF TRADING, MONEX USA, WASHINGTON:
“It sends a message of negativity. What markets, for the most part, and investors need is a little bit clearer guidance, especially when trying to figure out if the Federal Reserve is going to deliver what they want, which is 50 basis points slashed off the interest rate for the remainder of the year.”
“It brings, once again, to the table and to the spotlight that the United States is acting unilaterally to try to align trade and to try to get countries to align with trade. So ultimately, it does create a lot of negativity for the U.S. economy. It creates doubt about, where is this all going? What is the purpose? Is China really going to have to be very retaliatory moving forward in order to get the United States to negotiate better? So it creates a lot of doubt.”
CHRIS SCICLUNA, HEAD OF RESEARCH, DAIWA CAPITAL MARKETS, LONDON:
“It’s difficult to know how to respond to this (the Trump comments). The temptation, given what’s happened since the start of the year and the resilience of markets, is to fade these announcements and take this with a pinch of salt what he’s saying. We’ll have to see what the substance is.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“It’s fuel on the fire. For a while it looked like things were going well between Trump and Xi, but China’s latest export controls on rare earth minerals set Trump off. A lot can happen between now and the APEC summit where they were supposed to meet, so it wouldn’t be surprising to see tempers cool before then.
STEVE SOSNICK, CHIEF MARKET ANALYST, INTERACTIVE BROKERS, CONNECTICUT:
“The president’s comments are not are obviously not helpful for the market. We finally got through the worst of the tariff concerns and now we find ourselves once again faced with another round of them and the tone of his comments was certainly quite aggressive – massive tariffs being threatened and no reason to talk to him (Xi). So this is definitely going in the wrong direction about U.S. China trade relations. It’s definitely not a market friendly move and considering how quickly the market is selling off on this.”
ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, CONNECTICUT:
“He’s (Trump’s) caught the market off guard again and thrown more question marks into a market that is being questioned about a very high degree of enthusiasm and being sort of scrutinized for having too much fluff built into it. Then Trump comes out with this surprise announcement, so you have a market that hit an air pocket and is selling off a little bit. When you reacted to it in the past, it’s come back and burned you. Do you sell out of this market because of this? It’s a giant question mark. It just creates more questions and volatility in the market.”
MIKE BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON:
“It’s a bolt from the blue from Trump and after the rare earth news earlier … the timing is a big surprise. I would say as always with Trump and I think the market has learned this now, it’s difficult to determine what is the bluster and rhetoric and what he might follow through on.
The key thing market participants will be focused on as we move into the weekend and next week, is: are we now looking at having to tear up the assumptions we did have that trade was a done deal and now look at a re-escalation of tensions between the two.
If we are, and talks are in jeopardy, you are looking at a fairly chunky leg lower in risk in the days and weeks ahead.”
(Compiled by the Global Finance & Markets Breaking News team)
