Trump shrugs off China trade war concerns
US President Donald Trump has dismissed concerns over a protracted trade war with China despite a warning from Beijing that Washington's decision to label it a currency manipulator would lead to chaos in financial markets.
Trump, who announced last week he would slap a 10 per cent tariff on a further $US300 billion in Chinese imports starting on September 1, tweeted that "massive amounts of money from China and other parts of the world" were pouring into the US economy.
He also pledged to stand with American farmers in the face of Chinese retaliation. China has halted US agricultural purchases and raised the spectre of additional tariffs on US farm products.
US farmers, a key political constituency for Trump, have been among the hardest hit in the trade war. Shipments of soybeans, the most valuable US farm export, to top buyer China sank to a 16-year low in 2018.
While Trump played down the prospects of the trade dispute being drawn out, St. Louis Federal Reserve Bank President James Bullard said the US central bank may be stuck with a volatile global trade environment for years.
"I think of trade regime uncertainty as simply being high in the current environment," Bullard said at a National Economists Club luncheon. "I do not expect this uncertainty to dissipate in the quarters and years ahead."
Ratcheting up the pressure on China, the US Treasury Department said on Monday it had determined for the first time since 1994 that Beijing was manipulating its currency.
It acted after China decided to let the yuan fall below the key seven-per-dollar level for the first time in more than a decade, rattling financial markets and dimming hopes for an end to a trade war that has dragged into a second year.
Wall Street notched its worst day of 2019 on Monday. In late afternoon trading on Tuesday, major US stock indexes clawed back some of Monday's losses.
The S&P 500 index was up 1.1 per cent after falling three per cent on Monday, as investors digested moves by China and the United States. The yuan strengthened on Tuesday as China's central bank took steps to contain its recent slide.
London's FTSE 100 closed sharply lower, bringing its losses to more than five per cent since Trump announced the additional import tariffs on Chinese goods.
China's central bank said on Tuesday that Washington's currency move would "severely damage international financial order and cause chaos in financial markets," while preventing a global economic recovery.
China "has not used and will not use the exchange rate as a tool to deal with trade disputes," the People's Bank of China (PBOC) said in the country's first official response to the latest U.S. salvo.
"China advised the United States to rein in its horse before the precipice, and be aware of its errors, and turn back from the wrong path," it said.
The Trump administration wants to continue trade talks with China and is still planning to host a Chinese delegation for further talks in September, Larry Kudlow, director of the White House National Economic Council, told CNBC on Tuesday.
Kudlow said movement toward an agreement could change the outlook for US tariffs, adding, "It takes two to tango."
He added that the U.S. economy was still in good shape and said he saw no signs of a global recession on the horizon despite growing concerns the US-China standoff is slowing manufacturing activity around the world.
"The economic burden is falling vastly more on them (China) than us," Kudlow said.
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