The trade war ignited by U.S President Donald Trump against China has caused a dip in the stock markets of both countries..

The Dow Jones industrial average dropped more than 700 points as investors worried that trade tensions between the world’s largest economies would escalate, MSN reports on Friday.

The planned sanctions include tariffs on $60 billion worth of Chinese imports as well as restrictions on Chinese investments.

Mr Trump said he is taking those steps in response to theft of American technology but the Chinese government was quick to confirm it will defend itself.

Investors are worried that trade tensions would hurt US companies and harm the world economy.

On Thursday they fled stocks and bought bonds, which sent bond prices higher and yields lower.

With interest rates falling, banks took some of the worst losses. Technology and industrial companies, basic materials makers and healthcare companies also fell sharply.

Peter Donisanu, an investment strategy analyst for the Wells Fargo Investment Institute, said the risk of a damaging trade war is still low because the Trump administration is targeting specific goods that are not central to China’s economy.

That could change if it puts tariffs on products like electronics or appliances imported from China.

The war between the world’s two largest economies jolted China’s markets on Friday, with the country’s main stock indexes tumbling the most in six weeks, while bond yields fell as investors rushed into less risky assets.

But in contrast to stock market ructions, the country’s currency markets remained quiet, with analysts expecting that any Chinese response to U.S. trade actions is unlikely to include changes in its foreign exchange policy.

China shares fell sharply after Beijing unveiled plans for tariffs on up to $3 billion of U.S. imports in retaliation to U.S. duties on Chinese steel and aluminium products went into effect on Friday.

China urged the United States to “pull back from the brink”, while its embassy in Washington vowed Beijing would “fight to the end” in any trade war with the United States.

The Shanghai Composite index closed down 3.6 percent at 3,152.76 points, its lowest close since Feb 9.

China’s blue-chip CSI300 index was down 2.9 percent at 3,891.47, its lowest close since Feb. 12.


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