North American stocks got off to a rocky start on Wednesday as investors pulled back after the world’s two biggest economies released details of tariffs against each other, heightening global trade war fears.
China released a list of 106 U.S. goods valued at $50 billion US on Wednesday that could face a 25 per cent tariff increase. The goods include soyabeans and aircraft.
Officials did not give a date for when the hike would take effect, but said it would depend on when the U.S. decides to raise taxes on a similar amount of Chinese goods.
The move comes after the U.S. issued a list of Chinese products on Tuesday that could see tariff increases. Sectors that would be affected include aerospace, telecoms and machinery.
Meanwhile, U.S. President Donald Trump used Twitter again on Wednesday to respond to China’s announcement.
We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!—@realDonaldTrump
When you’re already $500 Billion DOWN, you can’t lose!—@realDonaldTrump
In New York, the benchmark Dow Jones industrial average fell one per cent, or 240 points, to 23,794, while the broader S&P 500 lost 0.6 per cent to 2,598 points.
The tech-heavy Nasdaq composite was down 0.7 per cent to 6,892. All three major indexes had seen steeper losses in early trading.
“Uncertainty over next steps as tensions escalate between the U.S. and China is driving a strong risk-off bias across global asset classes,” said Derek Holt, vice-president at Scotiabank Economics in a note. “The world’s ‘leaders’ are once again finding a way to blow what was otherwise shaping up to be a good picture for 2018.”
Mazen Issa, foreign exchange strategist at TD Securities, added that while both parties seem intent on avoiding a full-blown trade war, it is not “hard to envision how each could stumble into one.”
Companies in the IT, consumer discretionary and consumer staples sectors could be the most vulnerable in a trade war, said Oliver Jones, markets economist at research firm Capital Economics.
“This is presumably in part because all three depend on globalized supply chains which might be particularly vulnerable to a further deterioration of trade relations,” he said in a note.
Shares of U.S. exporters in industrials, IT and materials, including big names like Boeing, Caterpillar and Apple, were among the worst performers on the indexes on Wednesday.
Meanwhile, the Canadian market was on track for its lowest close since September.
The S&P/TSX composite index followed the global trend to lose 0.8 per cent to 15,067 points, with every sector in the red.
The losses were led by health-care stocks, particularly involving marijuana producers, which continued to decline.
Investors fled to the safety of gold, with the world’s largest producer, Barrick Gold, rising 0.7 per cent.
The Canadian dollar was down to 77.95 cents US from Tuesday’s average price of 78.05 cents.