August 26, 2019: Asian equity markets tanked and the yuan hit an 11-year low Monday after Donald Trump ramped up his trade war with China by imposing more tariffs on more than half-a-trillion dollars worth of imports.
The decision on Friday stunned investors, who ran for the hills, hammering European and Wall Street stocks, while safe havens such as the yen and gold — go-to assets in times of turmoil and uncertainty — surged.
The move, which also came with an outburst against China by the American president and a call for US firms to leave the country, overshadowed a broadly dovish speech by Federal Reserve boss Jerome Powell but one that fell short of Trump's demand for deep interest rate cuts.
Friday's tariffs hike was in response to Beijing's decision to raise levies on $75 billion of US goods.
Tariffs on $250 billion Chinese goods will go to 30 percent and those planned on $300 billion in Chinese goods go to 15 percent from October 1.
On Monday, China's yuan currency fell to 7.1487 to the dollar, its weakest level since early 2008 at the height of the global financial crisis. The drop is likely to ire Trump, who has labelled Beijing a currency manipulator.
“The gloves are coming off on both sides and as such yuan depreciation is an obvious cushion against US tariffs,” Mitul Kotecha, a senior emerging markets economist at Toronto-Dominion Bank, told Bloomberg News.
“As long as China can ensure that yuan weakness is well controlled i.e. it does not provoke strong outflows, expect to see further depreciation in the currency.”
On equity markets, Hong Kong led losses, slumping more than three percent, with investors also spooked by fresh violent protests in the city that saw police use water cannon for the first time.
Shanghai lost 1.3 percent and Tokyo ended the morning more than two percent off.
Sydney, Seoul, Wellington, Jakarta and Taipei all sank more than one percent.