Escalating US-China Trade War Impacts Global Markets

Asia-Pacific markets mostly rose on Tuesday following a tech rally that boosted Wall Street's three key benchmarks overnight. Japan's Nikkei 225 and Topix index rose 0.85% and 1.05% respectively, while South Korea's Kospi and Kosdaq indices gained 0.95% and 0.41%. Australia's S&P/ASX 200 edged up 0.21%, and India's Nifty 50 and BSE Sensex surged over 2%. Hong Kong's Hang Seng Index and Mainland China's CSI 300 fell 0.54% and 0.26% respectively. China is set to release its first-quarter 2025 GDP figures tomorrow, with investors expecting fiscal policies to support infrastructure development and home purchases. UBS slashed its 2025 China growth forecast to 3.4% due to potential tariff hikes between the US and China. US futures slipped as investors awaited earnings reports and weighed Trump's tariff plans.

US Vice President JD Vance stated that there is a "good chance" of the UK securing a trade deal with the US, citing President Donald Trump's affection for Britain and the strong cultural affinity between the two nations. Vance noted that the US is "working very hard" with UK Prime Minister Keir Starmer's government on a trade deal, and that Trump has a number of important business relationships in the UK. The UK escaped relatively unscathed from Trump's tariffs regime, and Vance expressed optimism that a trade agreement can be reached that is in the best interest of both countries.

U.S. stocks posted modest losses on Tuesday as investors analyzed the latest batch of first-quarter earnings reports. The Dow Jones Industrial Average lost 0.38%, the S&P 500 declined 0.17%, and the Nasdaq Composite ticked down 0.05%. Bank stocks provided upward momentum, with Bank of America and Citigroup rising after exceeding analysts' expectations. Despite recent gains, the three major indexes are still recovering from losses seen after President Donald Trump's original tariff announcement on April 2. Analysts remain cautious, citing ongoing uncertainty around tariffs and potential market volatility.

Boeing's shares fell 1% after a report that China had halted deliveries of its jets to airlines as part of the escalating trade war between the US and China. China has imposed 125% tariffs on US imports, including Boeing jets, making them unaffordable for Chinese customers. Boeing is heavily reliant on the Chinese market, which is expected to purchase 8,830 new planes over the next 20 years. The halt in deliveries is a significant blow to Boeing, which has been struggling with a drop in sales and has $51 billion in operating losses since 2018.

The European Union has announced it will impose retaliatory tariffs on a range of US goods, including toilet paper, soybeans, and eye makeup, if trade negotiations with the US aren't successful. The EU has published a list of around 400 US products that could face a 25% tariff, with another 1,300 items potentially being hit with steep import taxes at a later stage. The move is part of a wider trade war triggered by US President Donald Trump's tariffs on dozens of trading partners, which threaten to plunge economies into recession.

Former US President Donald Trump commented on Chinese President Xi Jinping's tour of Southeast Asia, stating it was a chance for China to "screw" the US, as Xi positions China as a stable partner in the region in contrast to the US.

The article discusses the potential consequences of a trade war between the US and China, sparked by Donald Trump's tariffs. It questions who has a more resilient population, the US or China, and whether third parties will take sides. The article also touches on the potential impact on globalisation and innovation if superpowers adopt top-down models.

Britain's parliament intervened to prevent a Chinese-owned steel mill from shutting down, sparking tension with China and raising questions about Prime Minister Keir Starmer's efforts to improve relations. The mill's owner, Jingye, refused government subsidies and allegedly refused to order vital raw materials, prompting accusations of bad faith. Britain secured the raw materials needed to keep the mill open, but is now left with a business losing $922,000 daily. China warned Britain not to politicize the dispute, amid a backdrop of Britain's charm offensive to thaw relations with China, including recent high-level visits to Beijing.

India could benefit from the ongoing trade war between the US and China, as the country's manufacturing sector is poised to gain from the shifting global supply chains. However, India is not yet ready to capitalize on this opportunity due to various challenges, including a lack of skilled workers, reliance on foreign inputs, high costs of land and raw materials, and a shortage of good financing from banks. Despite the government's efforts to promote manufacturing through initiatives like "Make in India" and investing over $26 billion in incentives, the sector's share in the economy has actually shrunk from 15% to less than 13% over the past decade. Indian manufacturers also face issues like inconsistent government policies, red tape, and a slow and arbitrary justice system. Nevertheless, there have been successes, such as Foxconn starting to manufacture iPhones in India, and some states like Tamil Nadu replicating parts of China's successful production system, with a cluster of Apple suppliers producing an estimated 20% of the world's iPhones.

Chinese President Xi Jinping urged solidarity with Vietnam against "unilateral bullying" by the US during his Southeast Asia tour, emphasizing the need to uphold the multilateral trading system and promote economic globalisation amidst the ongoing trade war between China and the US.

China's economy has historically experienced a slowdown in the second quarter after a strong start in the first quarter, a phenomenon referred to as transitioning from "open door red" to "summer blue". This pattern has been observed in previous years, including 2010, 2012, and 2019, when the economy started strong but lost momentum as the year progressed. Economists estimated China's first-quarter GDP growth to be around 5.16% this year, but there are concerns that the second quarter may see another slowdown, particularly amid an intensifying trade war.

Beijing's top official on Hong Kong affairs, Xia Baolong, has condemned US tariffs on Hong Kong as "arrogant" and "shameless", calling the US a "sinister manipulator" that undermines Hong Kong's prosperity and stability. Xia warned that betraying national interests would be denounced and urged entrepreneurs to contribute to Hong Kong and mainland China.

US President Donald Trump has accused Chinese President Xi Jinping of trying to "screw" the US during his visit to Vietnam, Cambodia, and Malaysia, as part of a charm offensive aimed at strengthening economic ties with Southeast Asian nations. Xi's trip comes amid an escalating trade war between the US and China, with Beijing facing tariffs of 145%. Trump claimed that Xi's discussions in Vietnam were focused on how to harm the US, but said he didn't blame them for it. Xi has instead posited China as a stable trading partner, contrasting with the chaotic policy backflips coming out of Washington, and signed dozens of cooperation agreements with Vietnam, including on enhancing supply chains and rail links. Vietnam is trying to maintain a delicate balancing act between the US and China, as it relies on both countries for trade, and many other Southeast Asian countries are also navigating this complex dynamic.

A senior Chinese official criticized US President Donald Trump's tariffs, warning they would backfire and that "those peasants in the US" would soon "wail in front of the 5,000 years of Chinese civilization," as Beijing shifts to forcefully hitting back at the US trade policies, particularly the 145 percent tariffs imposed on Hong Kong goods.

Australia's conservative opposition leader Peter Dutton has seen his poll lead evaporate ahead of the May 3 federal election, partly due to his attempts to emulate US President Donald Trump's policies, which have become unpopular in Australia. Trump's imposition of a 10% tariff on Australian goods has further damaged Dutton's standing, with a third of voters saying they are less likely to vote for him due to his association with Trump. In contrast, Prime Minister Anthony Albanese has benefited from his differences with Trump, criticizing the US president's tariffs as "totally unwarranted" and "not the act of a friend." Albanese's Labor government has successfully portrayed Dutton as a Trump acolyte, labeling him "DOGE-y Dutton." While it's uncertain whether foreign affairs will sway voters, Albanese is now leading in the polls, and Dutton's conservative coalition is struggling to overcome its own missteps and controversies.