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TEHRAN, May 21- Worries that the United States and China were digging in for a longer, costlier trade war weighed on financial markets on Monday as Beijing accused Washington of harboring “extravagant expectations” for a deal to end their dispute.
TEHRAN, Young Journalists Club (YJC) -Investors added up the costs of higher tariffs on Chinese and U.S. goods as well as the effects of severe U.S. restrictions on China’s Huawei Technologies for the U.S. technology sector, sharply driving down shares of suppliers Qualcomm, Micron Technology and Broadcom Inc.
Apple Inc shares fell 3.3 percent, hurt by a warning from HSBC that higher tariffs on Chinese goods would force the tech company to raise prices, with “dire consequences” on demand for its products.
Morgan Stanley analysts warned that a collapse of the trade talks and a lasting breakdown with higher tariffs on all U.S.-China trade would push the global economy toward recession.
In a note to clients, they said such a scenario would prompt the U.S. Federal Reserve to slash interest rates back to zero by the spring of 2020, but lags in policy transmission “would mean that we might not be able to avert the tightening of financial conditions and a full-blown recession.”
SOURED TONE
Negotiations between the United States and China have soured dramatically since early May, when Chinese officials sought major changes to the text of a proposed deal that the Trump administration says had been largely agreed.
A subsequent round of talks ended with no movement as U.S. President Donald Trump increased tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports and threatened to impose duties on all remaining Chinese goods sold in the United States.
China imposed a retaliatory tariff increase and the Trump administration followed up on Thursday by adding telecom equipment giant Huawei to a trade blacklist that restricts its ability to purchase American components and software and do business with other U.S. companies.
No new talks have been scheduled, and a sterner tone from Beijing suggested that negotiations were unlikely to resume soon and raised questions about a possible meeting between Trump and Chinese President Xi Jinping next month at a G20 Summit in Japan.
Source: Reuters
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