US President Donald Trump has sought to ratchet up pressure on China for trade concessions by proposing a higher 25 per cent tariff on $US200 billion worth of Chinese imports, his administration says.

US Trade Representative Robert Lighthizer said Mr Trump directed the increase — from a previously proposed 10 per cent duty — because China has refused to meet US demands and has imposed retaliatory tariffs on US goods.

“The increase in the possible rate of the additional duty is intended to provide the administration with additional options to encourage China to change its harmful policies and behaviour and adopt policies that will lead to fairer markets and prosperity for all of our citizens,” Mr Lighthizer said in a statement.

Markets at 7:30am (AEST):

  • ASX SPI 200 futures -0.4pc at 6,200, ASX 200 (Wednesday’s close) flat at 6,276
  • AUD: 74.03 US cents, 56.39 British pence, 63.48 Euro cents, 82.7 Japanese yen, $NZ1.09
  • US: Dow Jones -0.3pc at 25,334, S&P 500 -0.1pc at 2,813, Nasdaq +0.5pc at 7,707
  • Europe: FTSE -1.2pc at 7,653, DAX -0.5pc at 12,737, CAC -0.2pc to 5,498, Euro Stoxx 50 -0.5pc at 3,509
  • Commodities: Brent crude -2.3pc at $US72.53/barrel, spot gold -0.7pc at $US1,215.49/ounce

There have been no formal talks between Washington and Beijing for weeks over Mr Trump’s demands that China make fundamental changes to its policies on intellectual property protection, technology transfers and subsidies for high technology industries.

Two Trump administration officials told reporters on a conference call Mr Trump remains open to communications with Beijing and that through informal conversations the two countries were discussing whether a “fruitful negotiation” was possible.

“We don’t have anything to announce today about a specific event, or a specific round of discussions, but communication remains open and we are trying to figure out whether the conditions present themselves for a specific engagement between the two sides,” one of the officials said.

The duties will not be imposed until after a period of public comment.

The comment deadline has been extended from August 30 to September 5, the officials said.

“US pressure and blackmail won’t have an effect,” Chinese Foreign Ministry spokesman Geng Shuang told a regular news briefing.

“If the United States takes further escalatory steps, China will inevitably take countermeasures and we will resolutely protect our legitimate rights.”

The tariffs target thousands of Chinese imports, including food products, chemicals, steel and aluminium and consumer goods ranging from dog food, furniture and carpets to car tyres, bicycles, and baseball gloves and beauty products.

Investors fear an escalating trade war between Washington and Beijing could hit global growth.

Representatives of US Treasury Secretary Steven Mnuchin and Chinese Vice-Premier Liu He have been speaking privately as they seek to restart negotiations to defuse the budding trade war, Bloomberg reported, citing sources.

Fed keeps US rates on hold

The US Federal Reserve kept interest rates unchanged on Wednesday, as expected.

It also characterised the economy as strong, keeping the central bank on track to increase borrowing costs in September.

The Fed said economic growth has been rising strongly and the job market had continued to strengthen while inflation had remained near the central bank’s 2 per cent target since its last policy meeting in June, when it raised rates.

“Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low,” the Fed said in a unanimous statement following the conclusion of its latest two-day policy meeting.

“Household spending and business fixed investment have grown strongly.”

The Fed’s decision left its benchmark overnight lending rate in a range of 1.75 percent to 2 per cent.

The US central bank currently expects another two rate rises by the end of the year.

“The Fed demonstrated that they are willing to let the economy run a little hot as long as they don’t foresee a significant spike in inflation which would potentially serve as a headwind for the current bull market run,” chief global economist at Principal Global Investors Bob Baur said.

Investors had all but ruled out a move at this week’s meeting, with their sights set on rate hikes next month and in December.

Federal funds futures implied traders were pricing in about a 91 per cent chance of a rate rise in September and a 71 per cent chance of an additional hike in December, according to CME Group’s FedWatch program.

Market reaction to the Fed decision was muted as it met expectations on where the central bank would push policy rates, with the dollar slightly stronger against a basket of currencies and US Treasury yields little changed.

Fed Chairman Jerome Powell recently said the economy was in a “really good place” and pledged to continue with gradual increases in borrowing costs in order to maintain the second-longest US economic expansion on record.

US markets react

Wall Street ended its session mostly lower, as gains in Apple (+5.9pc) and technology stocks were offset by a drop in energy and industrial companies.

While technology stocks pulled the Nasdaq into positive territory, mounting US-China trade tensions sank the Dow Jones and S&P 500.

Trade-sensitive stocks fell on the news, with the S&P industrials index dropping 1.3 per cent.

The Dow Jones Industrial Average fell 0.3 per cent to 25,334, and the S&P 500 slipped by 0.1 per cent.

The Nasdaq Composite gained 0.5 per cent, as Apple shares hit a record high — after it reported better-than-expected quarterly results, driven by higher iPhone sales.

Of the 11 major sectors of the S&P 500, eight ended the session in negative territory.

“It is clear that a lot of businesses are growing concerned about the direction that [he tariff dispute] is heading,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, New Jersey.

“If the trade tensions continue right up to the midterm elections, it would be disastrous for the GOP.”

The US congressional midterm elections will be held on November 6.

Australian market today

Australian shares are expected to fall in early trade, with ASX futures down 0.4 per cent.

The price of iron ore (-2.4pc), nickel (-3.1pc), aluminium (-1.4pc) and copper (-2pc) fell sharply on the latest escalation in US-China tensions.

Brent crude oil prices dropped to a four-month low, losing 2.3 per cent to $US72.53 per barrel.

Oil prices fell overnight due to an unexpected lift in US crude stockpiles, and growing OPEC production raised concerns about swelling global supplies.

In economic news, the Australian Bureau of Statistics will release its June trade balance figures — which tracks the different in value between Australia’s imports and exports.

The Australian dollar has reversed its gains from yesterday, falling 0.3 per cent to 74 US cents.

“Investors will now watch any announcement from the White House related to China’s tariffs, with any escalation in trade tensions likely to weigh on the Australian dollar,” ANZ’s senior commodity strategist Daniel Hynes said.



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