The FTSE 100 dropped 0.9 percent today, in the midst of Sino-US tariffs.
The next set of US tariffs on 34 billion USD of Chinese goods will be implemented on the 6th of July, with a further 450 billion USD of tariffs earmarked, should China choose to retaliate. In addition, the US has put a block on companies with more than 25 percent Chinese ownership from investing in US firms which provide ‘industrially significant technology’, for instance aerospace, electric cars and robotics. As a counter-measure to this, the Chinese government has reduced the reserve limits on Chinese banks, which could free up as much as 108 billion USD into the economy.
The escalation of this conflict has already had an impact on European economies and in the UK, high street retailers and consumer confidence have been knocked. However, following a rally towards the end of last week – spurred by oil prices and a drop in the value of the pound – the UK economy is now bearing the brunt of the trade war, as the FTSE 100 dropped 70 points.
The recent downturn comes as British estate agents and tech firms face off trade war fears. Countrywide dipped over 20 percent this morning and Micro Focus faced a similar fate to its counterparts in Europe and the US, with a share price dip of 4.99 percent.
There “are signs that the rise in uncertainty associated with the first protectionist steps and the ratcheting up of rhetoric have already been inhibiting investment” said The Bank of International Settlements chief executive, Agustin Carstens.
Nick Campling, co-head of Mirbaud Securities added that, “the time has probably come whereby all things very exposed to global trade flows will begin to under-perform perhaps quite sharply”.
Looking to the future, recent protectionist measures by China and America most likely mark a point of no-return that will adversely affect the global economy. The FTSE 100 will have to look realistically at its ability to inspire trade in the international sphere and consumer confidence at home, in the wake of the US-China trade war and the looming Brexit deal.
