Just in case you were worried that global trade wars were in any danger of calming down, today you can relax. Trade hostilities with the European Union are heating up.
On Monday the Trump administration said it would impose tariffs on $11 billion in imports from the European Union because of what the White House calls illegal subsidies to Airbus. The United States and the European Union have been battling at the World Trade Organization for 14 years with each side accusing the other of illegal subsidies to Airbus and Boeing (BA).
The new U.S. tariffs would target European goods including jetliners, cheese, wine and motorcycles.Today the European Union called the U.S. claims “greatly exaggerated” and said preparations were underway to hit back. Officials at the European Union aren’t talking about how many billions in U.S. exports might be targeted, but Airbus has said the European Union would proceed with “far larger countermeasures against the U.S.”
All this comes as the United States and the European Union prepare to sit down to talks over cuts in industrial tariffs. The European Union is anxious to ward off threats from President Donald Trump to raise tariffs on European Union exports of cars and auto parts. Those tariffs would be a much bigger deal that those aimed at Airbus and announced yesterday.
On other trade fronts the Senate has not yet ratified the trade agreement the Trump administration struck with Mexico and Canada to replace NAFTA. Nor have trade talks with China yet resulted in an agreement that addresses contentious issues that include Chinese subsidies to national sector champions, strengthened protections for intellectual property, and forced technology transfers as a price for overseas companies to gain entry into China’s domestic market, and a way to enforce the fulfillment of promises made in the agreement.
The U.S. financial markets haven’t closed for the day but are poised to end a run of eight straight days with gains for the major indexes. As of 3 p.m. New York time the Standard & Poor’s 500 was down 0.65% and the Dow Jones Industrial Average was off 0.78%. The NASDAQ Composite was lower by 0.47% and the Russell 2000 had lost 0.77%. U.S.crude benchmark West Texas Intermediate has dropped 0.59% to $64.02 a barrel and the Brent International crude benchmark is off 0.69% to $70.61 a barrel.
Gold is higher by 0.49% to $1308.30 an ounce and copper is ahead 0.09% to $2.93 a pound.The yield on the 10-year U.S. Treasury is down 2 basis points to 2.50%. The Dollar Spot Index (DXY) is lower by 0.04%.The CBOE S&P 500 Volatility Index (VIX) is up 8.27%, as you’d expect on a down day for the markets and a return of trade fears, to 14.27.