Transcription
We begin with breaking news. China has just raised its tariffs against the US from 84% to 125%, starting on Saturday. Beijing says it will ignore any further tariff hikes from Washington.
Now, the news sent European stocks plummeting, and these are live pictures from the Frankfurt Stock Exchange of Germany's DAC DAX stock index. The day had started optimistically for investors before Beijing's announcement, and the United Nations Trade Agency has said the tariffs will have a catastrophic impact on developing nations. China says the US should bear full responsibility for the global economic turbulence.
All right. Well, here in the studio with me is Steven Beardsley from DW Business. Stephen, I wasn't sure I was going to see you again on my shift, but here we are again. Uh, so China's raised the tariffs from 84% to 125%. Um, it's this latest twist in this trade war between the biggest, uh, world economies, um, or the biggest economies in the world. Bring us the latest.
Yeah, I mean, you you've covered most of it pretty well right there as far as what we know right now. 84% going up to 125%, set to take effect tomorrow. Uh, China saying when it did this, a spokesman saying that, uh, basically the US has violated the norms of trade, continues to do that, and that it felt obliged then to further raise tariffs to match it. Interestingly, it also said, uh, the spokesman said that there would be no further attempts to match US tariff hikes bit by bit. It called the whole process a joke and so suggested that this might be the last hike that we see from the Chinese side. Um, it all, interestingly, I have here he also the spokesman also said that China took credit essentially, or he took credit for, uh, China took credit I should say for Trump's decision to pause, to put that pause on the other tariff, saying that it was their pressure that had essentially put so much strain on the US economy and it forced Trump to step back. So you see this kind of gamesmanship coming in, this willingness to push and say, look, we're willing to go mano a mano here, and that's I think why you're seeing those shares drop.
Now, analysts reckon the US uh, packs a bigger punch, but that China can take it on the chin. Um, how do you see that? I mean, one way, sure, right, this is a producer-consumer relationship. China is the world's biggest producer, and the US has been the world's economic consumer. I mean, it consumes everything, and particularly from China. So the common logic is that if we just stop buying, you know, on the one hand, then the other side stops producing, and they have to find places to send all that. Um, China can take it on the chin in the sense that it's not going to feel as acute a pain as probably the US has felt, is feeling right now and will continue to feel if things continue to go as they are. They are going to feel pain. Of course, don't get me wrong. There are tons of exports that they have to find a home for. If they can't bring in revenues and foreign revenues through those exports, especially US dollars, that presents their own problems with their currency. If they lower their currency as a result, that presents internal domestic problems. There an economy also like the US, largely propped up on debt in many places. If that starts to sort of wobble, that can be a problem. But for the US, it's a democratically elected administration there, and a lot of them are invested in the stock market. They don't want to see the turmoil that's going on right now. And um, when you talk about a global recession and especially when you talk about confidence in the dollar falling and the value of the dollar falling, they're getting nervous. So in that way, the US is vulnerable.
Now, just before coming to to air, I was taking a look at the markets, and you can just see the red. You just see, you just saw it there. They're just basically dropping again. It's another uh, day where we're seeing uh, this volatility. Should we essentially be bracing for what we've been seeing for another day of volatile uh, figures?
It would seem so. I mean, if you look at the Frankfurt Stock Exchange, I was just there for most of the week. And we we saw a lot of what we see now is this kind of up and down, right? And it's the attempt by investors to really understand first of all what it means for businesses that may have direct exposure to one country or another. But then in general, the what's the likelihood of a broader global recession that could hit economies in general. When you're there in the Frankfurt stock exchange, they have a list of different sectors and how they are. Are they in positive territory, negative territory? And what we saw over the past few days is that they were all in plus or they were all in minus. That means that investors aren't going, well, industrials are going to do well, and retails are going to suffer. They're going, recession chances are down then everyone goes up, right, or recession chances are up then things go down, and so these are broader market movements based on that fear of recession.
Now, another element that you did touch on it there about exchange rate, the dollar exchange rate has dropped, and it's at a three-year low against the euro. So what does this actually mean? Break it down for us for consumers.
Well, it depends on where your consumers are. It means if you're in the US, for example, a weaker dollar means you can buy less of imported goods that are coming in. If you are here in Europe, then you can afford more of the dollar. It makes certain things more attractive. It also means that global commodities that tend to be priced in dollars, they're a bit more affordable now for some countries. That's generally a good thing. But remember that the dollar is the world's reserve currency. And the fate of the dollar also means that that's the fate of a lot of reserves that other countries have in terms of their their their feeling of security having those as reserves. The big fear through all of this is a sell-off of US treasuries, a sell-off of US dollars, a fall in confidence in the US dollar. And so that's why there is a bit of surprise having seen the dynamic that's taken place. Usually, tariffs put on by one country would raise that country's dollar or that currency value. And in this case, we're seeing it weaken, and that suggests that a global recession is the big fear here and that confidence in the dollar in general is falling. That's not a good sign.
I said to you last time, it's been a busy week, right? Almost the weekend, Stephen.
All right, we'll leave it there. Steven Beardsley from DW Business, thanks for bringing us that update.
Thanks, Pablo. And of course, we'll be keeping a close eye on those developments here on DW News. And of course, you can follow us on social media and on our website. Time to take a look now at some more stories making headlines around the world. Spain's Prime Minister Pedro Sanchez is holding talks with Chinese President Xi Jinping in Beijing. The meeting is focused on fostering trade and investment ties. The US Treasury warned Spain that moving closer to Beijing would be quote cutting your own throat.