US-China Tariff War Erupts... US Index Futures and Crude Oil Decline

China Responds to US Tariffs with Retaliatory Measures

As China retaliates against the US with tariff countermeasures, stock futures and crude oil prices are showing a downward trend. The news that the US will impose tariffs on Chinese imports is interpreted as pressuring oil prices due to expectations of reduced oil demand amid economic slowdown.

As of 3:19 PM on the 4th, S&P 500 index futures fell 0.2%, and Nasdaq 100 index futures slightly declined by 0.21%, giving back the initial gains from the agreement to delay tariff imposition. After President Donald Trump decided on the 3rd (local time) to postpone tariffs on Canada and Mexico, the rise in the Hong Kong Hang Seng Index, which started on an upward trend, also narrowed.

With US-China trade tensions escalating, international oil prices are also declining. As of 3:29 PM on the same day, West Texas Intermediate (WTI) crude oil futures on the New York Mercantile Exchange were trading at $71.94 per barrel, down 1.67% from the previous trading day. Brent crude futures recorded $75.21 per barrel, down 0.99%.

The decision to delay tariffs on Mexico and Canada brought relief to asset markets, leading to a market rebound, but it was short-lived. On the same day, China decided to impose a 10% tariff on some US imports, including oil, in response to the Trump administration's additional 10% tariffs, plunging the market back into uncertainty. Bloomberg reported that President Trump's decision to delay tariffs on Mexico and Canada helped reverse the market, and investors pinned their hopes on phone talks between China and the US to resolve the tariff issues.

Charu Chanana, a strategist at Saxo Capital Markets, said, "The market is overreacting, and the current situation is increasing market volatility and uncertainty." He added, "The market is becoming increasingly sensitive."

With the outbreak of the US-China trade war, the key issue is how the US will handle the economic fallout. Concerns about the impact of the tariff war triggered by the US on the global economy were clearly reflected in the bond market on the 3rd. The 2-year Treasury yield rose, while long-term Treasury yields moved in the opposite direction.

Yung-Yu Ma of BMO Wealth Management said, "I believe tariffs are mainly President Trump's negotiation tool, but it is very difficult to say whether these tariffs will have only short-term effects or if negotiations to reduce tariffs will succeed."