London/Shanghai: Last week, US President, Donald Trump threatened to tax Chinese imports worth $200 billion. Severe repercussions of this threat are being felt in the international economy and a major decline was seen in the European and Asian stock markets including China. The Chinese stock market was hit the most and the index crashed to the lowest in last four years.
Since the last six months, a trade war has flared up between the United States and China, and both the countries have imposed taxes on each other’s imports. US President, Trump has indicated intensifying this trade war by threatening to tax the entire Chinese imports. Last week, Trump had instructed the US administration to make preparations to levy taxes on Chinese goods worth $20 billion.
Due to this announcement by Trump, it is being inferred that in all likelihood, the United States will impose tax of up to 25% on Chinese imports worth $200 billion, in the next few days. The extent of the trade war will increase with this announcement by Trump and the international economy will take a hit, is the fear expressed by the economists. This was reflected in the strong reaction seen in the stock markets on Monday.
The ‘Shanghai Composite Index,’ which is the main index of the Chinese stock markets, crashed by a whopping 1.1% and closed at 2,651.79. This is the second lowest since November 2014. The leading Chinese index, CAI300 also dropped by more than 1%. Hang Seng index in Hong Kong slid by 1.3% and China Enterprise Index fell by 1.2%.
Following China, the stock indices in India and other Asia-Pacific countries also saw a downfall of 1%. Stock indices Stocks600 in Europe, Dax in Germany, CAC40 in France, FTSE100 in the United Kingdom also reportedly crashed on Monday. The analysts and investors have claimed that the implementation of tax on Chinese goods worth $200 million will see a bigger drop in indices all over the world.