Trump comments on China tariffs hurt stock market

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Trump comments on China tariffs hurt stock market

Tensions between the world’s two largest economies were reignited by the U.S. president’s threat to impose further tariffs against China on Friday, harming investor sentiment in Korea on Tuesday.

The main Kospi bourse dipped more than 1 percent in the morning session Tuesday after Monday’s holiday, but later recouped the loss to close at 2,176.99, down 0.88 percent compared to the previous trading day.

The tech and bio heavy Kosdaq went down 1.1 percent, to 753.45.

The downturn follows the slide from major market indexes abroad on Monday, with Dow Industrial slashing 471 points and S&P 500 declining 1.2 percent. The Shanghai Composite closed down 5.6 percent.

The renewed worries came after U.S. President Donald Trump threatened to impose new taxes on some Chinese goods on Sunday, accusing China of backtracking on promises.

The sharp comment fueled worries that the ongoing trade talks may be derailed in their final stretch.

The country’s financial authorities also convened an emergency meeting to assess the impact that the tensions might have on Korea.

“The uncertainties surrounding the trade dispute between the United States and China have been renewed, but we are not in a situation that triggers a great anxiety, as the trade deal is currently underway,” said Governor Lee Ju-yeol of the Bank of Korea.

But he vowed to stay vigilant, saying that [the Bank of Korea] “will take measures to stabilize the market when needed and closely monitor the state of markets at home and abroad.”

Market analysts said that the stalled negotiations won’t escalate into major turbulence to the same degree that the markets experienced at the end of last year.

“The markets already experienced the U.S.-China trade dispute,” said Lee Seung-hoon, an analyst at Meritz Securities. “So it will not likely bring the kind of steep fluctuations that we saw last year.”

“If it turns out that the deal is just delayed, the market will stabilize after a short period of adjustment,” he said.

By sector, Lee said that the tech and automobile stocks will be highly exposed to the uncertainties while the dollar will stay strong against other currencies.

Kim Doo-un, economist at KB Securities, said that chances are slim that Trump’s threat will be realized.

“The further imposition of tariffs will likely drag down financial markets in the United States,” Kim said. “Trump’s comment appears to be intended to pressure China during the final stage of the negotiation and readily get what the United States wants.”

While U.S. Trade Representative Robert Lighthizer has said that Trump considers China to be reneging on promises, he said that a deal on tariffs is still possible.

Meanwhile, Finance Minister Hong Nam-ki has once again called on the National Assembly to pass the 6.7 trillion won ($5.73 billion) supplementary budget within this month, adding that a delay could harm the economy.

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