By Eamon Quinn
Global stock markets took fright at the prospects for a serious escalation in trade wars after US President Donald Trump ordered sweeping tariffs on $50bn (€40.7bn) of Chinese goods, bringing the world’s two biggest economies into conflict over economic policy.
“This is the first of many,” Mr Trump said.
The Ftse-100 index which slumped by 100 points at one stage ended 1.2% lower, and the losses of other European stock markets were even sharper.
The Dax index in Germany, which depends more than most large economies on exports for its prosperity, fell by 1.7%, while the Cac-40 index in Paris dropped 1.4%. In Dublin, the Iseq Overall index surrendered 80 points, or by 1.2%.
In the US, the Dow Jones Industrial Average fell 724.42 points, or 2.93%, to 23,957.89, the S&P 500 lost 68.24 points, or 2.52%%, to 2,643.69, and the Nasdaq Composite dropped 178.61 points, or 2.43% , to 7,166.68.
Irish experts have long warned the Irish economy, home to so many multinationals that export almost all of their products and services to world markets, is particularly exposed to any breakout in global trade conflicts.
The Economic and Social Research Institute said this week there is a direct exposure to the Irish economy from a fall in world trade.
An “equity retreat turns into a rout,” said Chris Beauchamp, chief market analyst at online broker IG, noting the sell-off on Wall Street.
Markets are in full retreat “and the drop has been exemplified by a triple-digit decline on the Ftse-100,” Mr Beauchamp said.
“The index has returned to December 2016 levels, a remarkable change from last when it was riding high above 7,200”.
The president instructed US Trade Representative Robert Lighthizer to levy tariffs on at least $50bn in Chinese imports.
Within 15 days, USTR will come up with a proposed list of products that will face higher tariffs.
“This has been long in the making,” Mr Trump said, adding the tariffs could affect as much as $60bn in goods.
“We have a tremendous intellectual property theft situation going on” with China affecting hundreds of billions of dollars in trade each year, he said.
Mr Trump also directed Treasury Secretary Steven Mnuchin to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the US views as strategic, said senior White House economic adviser Everett Eissenstat.
Policymakers across the world are warning of a brewing trade war that could undermine the broadest global recovery in years.
US business groups representing companies ranging from Walmart to Amazon are warning US tariffs could raise prices for consumers and sideswipe stock prices.
China is preparing a range of responses and has threatened to retaliate by hitting US agricultural exports.
“The markets should dislike the possibility of a trade war between United States and other countries,” said Stephen Wood, chief market strategist for Russell Investments in New York.
“However, there’s a lot of negotiation taking place there. Suddenly we’re seeing smaller numbers and exemptions,” he said.
Some investors said that the comments from new US Federal Reserve head Jerome on US interest rates, as well as the Facebook issues, were fuelling the sell-off on Wall Street.
Additional reporting Bloomberg and Reuters