Global stocks tumble after new Trump tariff threat

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President Donald Trump threatened to impose a 10 percent tariff on another $200 billion of Chinese goods, and Beijing warned it would retaliate. Oxford Economics estimates that if Trump imposed the $200 billion in duties and China responded in kind, usa growth could slow by 0.3 percentage point next year. Beijing retaliated with a 25 percent tariff on US soybeans and other goods starting July 6, sending soybean futures Sc1 to a two-year low and throwing into doubt forecasts for USA soybean exports to rise 11 percent this marketing year.

President Donald Trump has claimed that America has "rebuilt" China, saying the Communist trading giant has been "taking out" $500 billion a year from the US.

Moments before Freeland's testimony, Trump unleashed a fresh attack, accusing Canadians of sneaking their American shopping back home - all because of what he calls "massive" tariffs on American goods.

In U.S. economic news, the Commerce Department released a report showing a much bigger than expected jump in new residential construction in the month of May, although the report also showed a much steeper than expected drop in building permits.

The pan-regional STOXX 600 was on track to relinquish gains recorded on Thursday when a dovish European Central Bank pushed back expectations for an interest rate hike.

Germany's DAX was down a sharp 1.3 per cent to 12,673 and France's CAC 40 fell 1.1 per cent to 5,394.

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US stock markets are opening higher Wednesday as investors set aside fears about a USA trade war with China for the moment.

The move followed tariffs applied last week on $50 billion in Chinese imports to the US.

NEW EUROZONE BUDGET: German Chancellor Angela Merkel and French President Emmanuel Macron have agreed to create a eurozone budget. The VIX, Wall Street's so-called fear gauge, spiked 14% and CNNMoney's Fear & Greed Index, a measure of market sentiment, shifted from "Greed" to "Neutral" territory.

The producer cartel of the Organisation of the Petroleum Exporting Countries (OPEC), which is de facto led by Saudi Arabia, and some allies including Russian Federation have been restricting output since the start of 2017.

That would leave less than $100 billion in USA goods to subject to a tariff hike, far short of the $200 billion Trump is threatening.

Some analysts, however, believe there is still room for compromise, suspecting Trump's announcement was a negotiating tactic to wring faster concessions from Beijing.

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Even before trading partners imposed tariffs, US farmers were facing a tough year.

CURRENCY: The dollar declined to 109.75 yen from Monday's 110.54 yen.

The three major indexes pared losses from earlier in the session. The strongest is probably a consumer boycott of U.S. consumer goods but it can also use restrictions on investments in China by USA companies as there are far more United States companies in China than the other way around. Shanghai stocks plunged to two-year lows.

Now an even more bearish tone hangs over agricultural markets due to trade spats with NAFTA partners Canada and Mexico, plus mounting tensions with China and Europe. The dollar also got stronger, and the ICE-US Dollar Index hit its highest level since July.

A paper published by Canadian think tank the CD Howe Institute suggests that Mr Trump's threats are having an effect on USA manufacturing by using "uncertainty as a new weapon in trade protection". "But investors should be cautious".

"So far investors have been escaping to high-tech shares and small cap shares".

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