Global equities plummet as Trump signs Chinese tariffs

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  • US President Donald Trump announces his tariff plan against China with numerous exemptions
  • China plans to take retaliatory steps with a much less scale though
  • US National Security Advisor is going to be replaced with John Bolton

Global equities tumbled while the US dollar lost ground after US President Donald Trump chose to finally sign his long-promised tariffs against China being worth up to $60 billion fuelling fears regarding a global trade war. Mr Trump said on Thursday "this is the first, but this is the first of many" suggesting that his vision aimed at fighting off undue trade deficits with the US seems to be a broad-based one. However, the first step taken by the US administration includes many exemptions for countries such as Argentina, Australia, Brazil, Canada, Mexico, South Korea and the members of the European Union. Trump is to decide again on 1 May whether those countries will be still exempt from the tariffs. Thus, there is no doubt that Trump strives to trim a tremendous trade deficit the US holds with the Chinese economy.

Meanwhile, the first response from Chinese authorities proved to be quite balanced as they said that China is not afraid of a trade war, and will defend its own interests. Thus, the first step taken by the second-largest economy seems to be just telltale as the retaliatory tariffs are to target only $3 billion of US goods. To be more precise, China is going to impose a 25% tariff on pork, a 15% on US steel pipes, fruit as well as wine. Furthermore, the official statement released by the Chinese Embassy in the United States says that "the actions undertaken by the US are self-defeating; they will directly harm the interests of US consumers, companies and financial markets; they also jeopardise international trade order and world economic stability".

Equity markets took a dive all around the globe beginning with Europe, US as well as Asia. In the United States the Dow Jones (US30 on xStation5) was afflicted the most plummeting as much as 2.9%, the SP500 (US500) plunged 2.5% while the NASDAQ (US100) fell 2.4%. Declines turned out yet more severe in Asia where the Japanese NIKKEI (JAP225) lost 4.5% (the net effect was undermined by increased demand for the yen). On top of that, the Chinese major benchmarks are losing between 3.5% and 4% for a while before the final bell this week.
A technical view does not bode well for bulls as the index broke out of a triangle pattern. Consequently, the first support where buyers could look for reprieve seems to be placed at 23200 points implying decent room for bears to continue their move. If slides deepened during the last session this week it would result in the worst trading week for many months. 

The US dollar remains the worst currency in the G10 basket losing the most against the Japanese yen. The latter was slightly underpinned by the inflation data for February coming in in line with forecasts. However, a much more relevant impact could have had the official decision of Trump concerning another reshuffle in his cabinet. He informed that John Bolton will be named new National Security Advisor replacing General McMaster (the first revelations leaked out already a week ago). Bolton is going to begin his term in office on 4 April.
The USDJPY slid to its lowest point since November 2016 in response to fears regarding a global trade war. Technically the pair seems to have decent scope to keep on falling as the first more notable support lines are drawn at 101 followed by 100.