Likely impact of US-China trade war: Prices up, growth down

U.S. tariffs take effect, China warns of 'counterattack'

"We think trade works for the American economy and tariffs don't".

USA stock index futures dipped on Friday after the United States and China slapped tit-for-tat duties on $34 billion worth of each other's imports, triggering what Beijing called the "largest-scale trade war".

A trade war, which has a strong risk of roiling global financial markets, remains a grave threat as Washington and Beijing flex their muscles with no sign of negotiations to ease tensions.

With the war of words between the world's two largest economies getting escalated into a full-blown trade conflict, many fear there is expected to be a drag on global growth this year and even in 2019.

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Reporting on the second quarter kicks into gear this coming week, with results Friday from JPMorgan Chase, Wells Fargo and Citigroup. "The market is counting on this to subside".

The Dow Jones Industrial Average finished up 0.4 percent to close the week at 24,456.48. The Nasdaq Composite also advanced, as shares of Biogen surged 19.63 percent. The Russell 2000 index of smaller-company stocks picked up 14.57 points, or 0.9%, to 1,694.05.

After a wobbly start, U.S. stocks mounted a rally, shaking off two consecutive weekly losses. Analyst said that the market already had reflected the impact earlier.

News of the hold-ups came as Washington imposed tariffs on $34 billion of Chinese imports from 0401 GMT on Friday.

Yu Zhi, an economist in Shanghai, has urged Beijing to "fully estimate the negative impact of the trade war on the Chinese economy" and find ways to avoid it. These initial tariffs are unlikely to inflict serious harm to the world's two biggest economies. As China opted to respond in the first round of tariffs, the ball is now back in US President Donald Trump's court, said Huang, who observed that the US had initiated Section 301 trade action against China several times in the past, in 1991, 1994, 1996 and 2010.

Escalating tariffs are likely to slow business investment as companies wait to see whether the administration can reach a truce with Beijing.

US equities marched higher after monthly jobs data showing a 213,000 gain in non-farm payrolls in June and stable wage growth.

Kim said politically Trump's trade war is targeted at shoring up support for the mid-term elections in November and economically it is targeting at improving the US trade deficit. Now the Korean government projects the nation's growth to reach 3 percent by the end of the year.

There are already signs within the U.S. that companies are pausing decisions on investment and hiring and input costs flowing from the earlier increase in duties on steel, aluminium and washing machines are flowing through to higher end-prices.

That equates to 700,000 barrels per day, 8 percent of China's daily imports and a large volume for the United States, a newcomer to the Chinese market. Brent crude, used to price worldwide oils, fell 28 cents to close at $77.11 per barrel in London.

Still, some US companies are benefiting. Helmerich & Payne added 2.6 percent to $65.36.

Benchmark 10-year notes last rose 4/32 in price to yield 2.8254 percent, from 2.84 percent late on Thursday. Signs of nervousness were, however, evident in markets with the yen and the Swiss franc firm against the dollar while core U.S. and German bonds in demand. Silver slipped 3 cents to $16.07 an ounce.

Stocks edged higher in Europe, with the pan-European FTSEurofirst 300 index closing 0.2 percent higher. Britain's FTSE 100 gained 0.2 percent.

"While this is mostly discounted, the fact is that the uncertainties of how long this trade war will last is going to supersede any good macro news", said Peter Cardillo, chief market economist at Spartan Capital Securities in NY.

World stocks rose 0.2 per cent to their highest level in a week while Asian stocks climbed almost half a per cent led by a rebound in Chinese shares.

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