Trump to push forward with further 50% tariff on China | Invesloan.com

Good morning and welcome back to FirstFT Asia. In today’s newsletter:

• Trump to proceed with extra 50% tariff on China

• Zelenskyy says Ukraine captured Chinese men fighting for Russia

• Can Nintendo’s Switch 2 revive the gaming industry?

Donald Trump is pushing ahead with another 50 per cent tariff on Chinese goods, escalating his trade war with Beijing in a move that will cascade across supply chains between the world’s two biggest economies.

What’s happening: Chinese goods entering the US will now face duties of more than 104 per cent — a level that will be seen as a provocation by Beijing. The US president is moving ahead with the new taxes after Beijing rebuffed his call to rescind the 34 per cent tariff it imposed on American goods in retaliation for the “reciprocal” duties he announced last week. The extra tariffs make China, the world’s largest exporter, the most penalised country in Trump’s global trade war.

Karoline Leavitt, White House press secretary, said the new tariffs would “be going into effect at 12.01am” eastern time on Wednesday. She added: “The president also wanted me to tell all of you that if China reaches out to make a deal, he’ll be incredibly gracious, but he’s going to do what’s best for the American people. China has to call first.”

A spokesperson for China’s commerce ministry warned against Trump’s step yesterday, saying Beijing would “resolutely take countermeasures to safeguard its own rights and interests. If the US insists on going its own way, China will fight to the end.”

Can we talk?: Washington and Beijing have had no serious communication on their trade tensions, and US trade representative Jamieson Greer said China had not signalled any willingness to engage in trade talks. Meanwhile Japan emerged yesterday as the first major economy to secure priority tariff negotiations with Trump, highlighting its status as Washington’s biggest creditor and investor. Trump said he had also spoken with the acting president of South Korea and that a delegation from Seoul was “on a plane” to the US.

Market reaction: US stocks closed sharply lower, reversing an early rally after the White House said Trump would proceed with the extra 50 per cent tariffs on Chinese goods. The benchmark S&P 500 index closed down 1.6 per cent, a significant pull back from a gain of as much as 4.1 per cent earlier in the trading day. The Nasdaq Composite lost more than 2 per cent. Follow our live blog for more updates.

• Interview: Singapore fears Trump’s tariffs will trigger a global trade war that will be “very hostile” for trade-dependent small nations, the city-state’s foreign minister told the FT.

• EU-China relations: Brussels and Beijing should work to reach a “negotiated resolution” in the face of US tariffs, European Commission president Ursula von der Leyen said after a call with China’s Premier Li Qiang.

• Gaming the system: Companies, in theory, could exploit the differences between Trump’s tariff rates. Here’s how.

• FT View: Forced to choose between the US and China, south-east Asian countries may opt for Beijing, our editorial board writes.

For more analysis on the tariffs, sign up for our Trade Secrets newsletter if you’re a premium subscriber, or upgrade your subscription. Here’s what else we’re keeping tabs on today:

• Trade war: The US’s “reciprocal tariffs” are due to take effect. Here’s what to know about the new measures.

• Monetary policy: India and New Zealand announce their interest rate decisions.

• UK-India Economic and Financial Dialogue: Government officials from both countries, including Indian finance minister Nirmala Sitharaman and UK chancellor Rachel Reeves, will hold talks in London.

• Seven & i Holdings: The Japanese owner of 7-Eleven reports FY 2024 results, as it faces a takeover attempt by Canada’s Alimentation Couche-Tard.

Five more top stories

1. Volodymyr Zelenskyy has said his forces have captured fighters from China who were supporting Russian troops in eastern Ukraine, marking the first time Chinese citizens have been taken captive during the war. The two Chinese fighters had both been recruited by Russian military officials to sign up as contract soldiers, according to Ukrainian officials familiar with the matter.

2. The US Department of Justice is scaling back cryptocurrency enforcement, the Trump administration’s latest move that is set to benefit an industry the president has championed. US law enforcement will no longer target crypto exchanges, mixing and tumbling services as well as wallets “for the acts of their end users or unwitting violations of regulations”. Here are more details.

3. Investors lost $25.7bn in leveraged exchange traded funds late last week, in the biggest ever meltdown for risky funds that have drawn huge inflows in recent years from retail traders seeking quick returns. The high-octane funds, which magnify the daily returns of individual stocks or indices by up to five times, lost almost a quarter of their value as they were hit by the market fallout from Trump’s trade war, according to calculations by FactSet.

4. The cost of insuring against debt defaults in Europe’s car industry has soared, as investors ditch bonds in the sector in response to Trump’s tariffs. The auto sector’s slump in response to punitive tariffs, which includes a 25 per cent levy on vehicle imports, means that it now stands out as Europe’s biggest debt market casualty.

5. Mexico’s government is talking to the private sector about expanding fracking as Trump’s trade threats heighten fears over the country’s dependence on US gas. President Claudia Sheinbaum, a former climate scientist, directed officials to explore fracking to help deliver energy independence, executives with knowledge of the conversations have said.

The Big Read

Hopes are high that Nintendo’s Switch 2 console unveiled last week can revitalise the gaming industry, which has struggled with stagnant revenues. But the Japanese company has already been thrust into the centre of an escalating trade war — and risks becoming ones of its earliest victims.

We’re also reading . . . 

• No way out: Even if Trump backs down, he will have succeeded in building uncertainty, which is itself a sort of tariff, writes Harvard University’s Jason Furman.

• New digs: Former Google chief Eric Schmidt bought a London mansion for almost £42mn, the latest high-profile property deal by an American buyer in the city. 

• Fox News: As rightwing critics slam Trump’s tariffs, the conservative news network has other priorities.

Chart of the day

The implicit assumption of Trump’s “reciprocal” tariffs is that in a fair world, trade would balance with every single partner. “This is utter lunacy”, writes FT columnist Martin Wolf.

Take a break from the news . . . 

With the boom in all things Korean — K-pop, kimchi, Korean skincare, Squid Game — soju is popping up in cocktail bars and supermarkets the world over. Could this be the drinks breakthrough year?