Trade war mayhem filtered through to Asian markets on Monday as China ramped up the rhetoric following the weekend tweet storm from United States President Donald Trump.
In China, the Shanghai Composite Index tumbled 1.2% to close at 2,903.71 points, while the Shenzhen Component Index fell 1.4% to finish at 9,103.36. As for the Shenzhen Composite Index, it slipped slightly more than 1%.
Elsewhere, Japan’s Nikkei 225 edged lower at 0.7% with shares of Softbank Group falling 3.2%, while South Korea’s Kospi was down 1.3%. Hong Kong’s Hang Seng Index avoided the turmoil as it was closed for a public holiday.
“It remains to be seen how the markets will react this week once they are back in full swing, but the news on the trade-tariff front is anything other than reassuring,” David de Garis, a director and senior economist at National Australia Bank, wrote in a morning note.
Later, China’s Ministry of Foreign Affairs weighed into the trade row at a routine media briefing.
“China will never surrender to external pressure,” Spokesman Geng Shuang said. “We have the confidence and the ability to protect our lawful and legitimate rights.”
Last week, Trump carried through his threat to more than double the tariffs on Chinese imports worth US$200 billion. He also revealed plans to hit the remaining $300 billion worth of goods coming into the US.
“We are right where we want to be with China,” he tweeted. “Remember, they broke the deal with us [and] tried to renegotiate.”
Beijing has made it clear that President Xi Jinping’s government will retaliate to the latest round of tariff hikes. But so far, there has been a distinct lack of details.
“Please continue to pay attention,” Geng replied when asked about what China would do next.
On the domestic front, economic data has been a mixed bag. Consumer spending has cooled but appears to been holding up, figures released from the National Bureau of Statistics confirmed last month.
Still, certain sectors are stalling, including the crucial auto market.
On Monday, China’s Association of Automobile Manufacturers released disappointing numbers with car sales dropping by 14.6% in April to 1.98 million units compared to the same period in 2018.
Indeed, this was the 10th consecutive monthly fall.
Analysts have pointed out that the slump, in part, is down to the removal of tax rebates for small-vehicle purchases. But the problem appears to run much deeper.
“At present, the main reason for the market downturn is a lack of consumer confidence,” the China Association of Automobile Manufacturers said in a statement before adding: “We are full of confidence in the stable development of the automotive market throughout the year.”
Unless, of course, the trade war puts a brake on that.