Yuan Plunges, U.S. Stock Futures Drop on Trade War: Markets Wrap

China considering cancelling trade talks with US media reports

The tweets upended the previously calm market mood that had benefited from signs of improving economic growth in China and the United States, and from comments from Trump and other senior USA officials that trade talks were going well.

So far, the USA and China have imposed tariffs on $360 billion in two-way trade since previous year.

The US government hit China with the most extensive tariffs, starting a trade war between the world's two largest economies.

Officials at China's Foreign Ministry, Ministry of Commerce and State Council Information Office did not immediately respond Monday to requests for comment.

The White House then gave a January 1 deadline for trade talks to succeed.

According to estimates in a May 5 Bloomberg report, US tariffs have resulted in a 0.5 percent decrease in China's GDP growth in 2019 thus far.

China's yuan plunged the most in three years and equity markets were roiled after President Donald Trump's threat to increase tariffs on Chinese imports cast a cloud over talks this week that were expected to finalize a trade deal.

"A deal with China has already been essentially priced in, if not fully".

Nevertheless, the president's aggressive strategy drew rare bipartisan support from U.S. Senate Democratic leader Chuck Schumer, who urged Trump to "hang tough" in a tweet: "Don't back down".

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However, both U.S. and global firms have said they are being harmed by the trade war. "So, it's likely to see a longer trade war", the expert said, speaking on condition of anonymity citing the sensitivity of the topic.

In Sydney the benchmark ASX200 was off 1.1% while the Australian dollar - a proxy trade for the Chinese economy and commodities - fell 0.7% and is now below the US70c mark. "That said, both sides have invested significant time and resources to come this far".

Chinese Vice Premier Liu He was due to travel to Washington for talks this week after a round last week in Beijing that Treasury Secretary Steven Mnuchin called "productive".

Last week, industry sources said they believed the talks were in the endgame and Mnuchin had said he hoped the U.S. negotiating team would soon be able to recommend a deal to Trump or tell him that one could not be reached.

One of the sources said Trump's decision to more than double the tariff rate on $200 billion of goods was meant to send a message to Liu to not come to the U.S. with more "empty offers".

The panic on Chinese share markets was exacerbated by Donald Trump's warning that his administration would tax almost all of China's exports to the United States.

In recent days, US officials grew frustrated with some of China's backpedaling on some of their earlier commitments, including on the crucial matter of technology transfer, two people familiar with the situation said.

Negotiations about tariffs have been one of the remaining sticking points between the two sides.

Trump says he wants to reduce the huge U.S. trade deficit with China, which in 2018 totalled $378.73 billion if you include trade in services.

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