Trade tensions further intensified between China and the US after US President Donald Trump placed Huawei on an export blacklist, a move that restricts the Chinese telecoms giant from buying parts and components supplied by American firms without the US government approval.
To retaliate against the US, China as the biggest exporter of rare earth issued veiled threats to curb the supplies of the materials to the US. Rare earth elements are a key component in smartphones, electric cars and even military equipment, any moves to squeeze the supply would have devastating impacts on manufacturers.
Ever since the last trade negotiations turned sour, there are no high-level or face-to-face meetings between China and the US. There are hopes that Trump and Chinese President Xi Jinping will meet at the G-20 summit at the end of June in Japan to jump-start the stalled negotiations.
Coming on the heels of the US-China trade war, Trump opened a new front in the trade war by announcing a five percent tariffs on all Mexican imports starting June 10 and planning to “gradually increase” the tariff every month to 25 percent by October until Mexico curbed illegal migration.
Following the fresh threats against Mexico, Trump removed preferential trade status for India beginning June 5, the second largest trading partner behind China. The preferential trade program allows developing countries to export products to the US duty-free.
Late into the fortnight, the US market recovered some of the losses after accommodative comments by US Federal Reserve Chairman Jerome Powell on June 4. Powell acknowledged the trade tensions and signaled that the Fed is willing to act if necessary to support growth.
Over the fortnight, the Dow Jones Industrial Average (DJIA) rose 0.9 percent to close at 25,720.66 while the broad-based S&P 500 added 0.8 percent to end at 2,843.49. The tech-rich Nasdaq Composite Index was flat at 7,615.55.
Meanwhile, the mood is unsettled in Asia with Hang Seng Index bearing the brunt of the losses, sliding 1.4 percent to close at 26,965.28. Shanghai Composite Index fell 0.9 percent to close at 2,827.80. Japan’s Nikkei 225 also decreased 1.1 percent to 20,884.71.
Over the local front, Singapore was added to a watch list for currency manipulation by the US as Singapore has a trade surplus of approximately US$17 billion in 2018 with the threshold currently standing at US$20 billion.
In the same period, local benchmark Straits Times Index (STI) closed lower 0.1 percent, closing firmly below the 3,200-point critical psychological level at 3,166.29.