The Australian sharemarket, or the All Ordinaries Index (INDEXASX: XAO)(ASX: XAO), is predicted to have a painful day today with investors worried about the US-China trade war… again.
What Has Happened?
After the ASX had closed on Friday, US President Donald Trump sent out more of those infamous tweets to send shudders through investor ranks. These new tweets were in response to China’s decision to impose additional tariffs on US$75 billion worth of US goods just hours earlier.
I’m sure you remember that over the past year, President Trump has implemented a number of tariffs on various Chinese goods.
But, he’s now at a stage where he’s put tariffs on pretty much all of the Chinese goods already. So what financial pressure could the US put on China?
Increasing the tariff rate is Trump’s plan, even though it is American consumers and businesses that are paying the tariffs to the US coffers.
In his tweets, Trump announced the US could increase tariffs on $250 billion of Chinese goods from 25% to 30%, starting from 1 October 2019.
The US President also said that planned tariffs for $300 billion of imports will be implemented at 15% instead of 10%, taking effect on 1 September 2019.
Some of these tariffs had already been delayed on products like clothing and electronics. They were scheduled to come in at the start of September but were delayed to mid-December to make sure it didn’t hurt the imperative Christmas shopping season.
Another tweet said he had ordered American companies to consider alternative manufacturing locations instead of China, suggesting the US would be the best place to make things.
This of course had a negative impact on many US shares, particularly ones with a link to China. For example, the Apple Inc. (NASDAQ: APPL) share price fell 4.6% and the Alphabet Inc (NASDAQ: GOOGL) share price also fell by over 3%. Most other shares were affected too.
What Will The ASX Do?
I wouldn’t be surprised to see many of the ASX shares that are linked to China affected today as well, such as BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG).
There is likely to be a lot of red today, except the gold miners perhaps. But it could also throw up an opportunity or two.
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.