The “Tariff Man” strikes again. Two tweets by Donald Trump over the weekend have put markets into risk-off mode. US-China trade talks had seemed to be going well. A “historic” trade deal this Friday was possible. The US president’s motives might have been tactical, to increase pressure on Beijing. But for weeks, expectations of an imminent deal have been priced into the Chinese markets.
This could well reverse. China mainland’s CSI 300 index slipped 6 per cent on Monday, the biggest fall in more than three years. The renminbi hit its lowest level against the dollar since January. The fall was followed by sharp equity price declines in Europe and US. Bond yields and oil prices also dropped.
Even after Monday’s declines, the CSI 300 is up 18 per cent this year. More than a tenth of all companies in the CSI 300 are up more than 50 per cent this year, including the baiju (Chinese liquor) maker Wuliangye Yibin. With a $53bn market value it has become one of the world’s largest drinks companies.