Wall Street gains wiped out by fears of trade war

Stocks slide again on report the U.S. plans more tariffs on Chinese goods

Don't get too optimistic about a thaw.

Bloomberg News reported that the Trump administration will put tariffs on the rest of the United States' imports from China if the two nations' presidents don't make substantial progress in easing the trade dispute next month.

China and the United States are now engaged in a trade row which was triggered by the U.S. slapping 25- and 10-percent tariffs on steel and aluminum imports, respectively, from China in April. China's overnight repo rate surged the most in more than four years as authorities take steps to combat bets against the yuan, which held near the weakest level in a decade against the greenback. An estimated $257 billion of Chinese imports remain tariff-free for now. "They like the Venezuela financial model, high taxes & open borders", Trump tweeted Tuesday.

The report sent a market that was rising after promising tech news back down, causing the Dow and S&P 500 to give up their gains for the year.

They would be on top of the United States dollars 250 billion already imposed. "We are watchful of any retaliatory actions from China, as well as possible slump in Chinese technology stocks". "Then each side should make its own proposal".

For most of this year investors have remained hopeful that the US and China would work out there disagreements on trade, but in recent weeks they've lost some of their confidence. But Chinese officials are unwilling to engage in a one-sided negotiation, and they worry that Trump could undermine any potential deal with as little as a single tweet, according to the Journal. The dollar would be devalued as never before - which would help the USA trade position and exports, but would also prompt a surge in American inflation and a squeeze on living standards. The reason behind this slide isn't because of manipulation by the People's Bank of China.

Talks are planned next month between presidents Trump and Xi Jinping.

CHINESE TRADE DEAL: In an interview with Fox News on Monday, President Trump said he thinks there will be "a great deal with China", while adding that tariffs on $267 billion more in Chinese goods were "waiting to go" if a deal was not reached. Indeed, that's exactly what Trump would do if the shoe were on the other foot.

"We don't see the trade war being resolved any time soon", said Rabobank's senior macroeconomic strategist Teeuwe Mevissen. And for bow it's not even clear whether the Trump administration is looking for a different outcome. The confrontation lasts several months and is accompanied by the mutual establishment of new import duties. "You know why? 'Cause we always win".

It could well be both.

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