US Treasury yields also fell as investors sought safe-haven assets. US crude futures were down more than 3 per cent. White House trade adviser Peter Navarro told Fox Business Network US-China trade talks would nevertheless continue in September and dismissed the Chinese tariff threat as small in terms of the US
On Thursday, top White House economic adviser Larry Kudlow said there was progress in a deputy-level US-China trade call this week.
But neither side so far appears to be ready to make a significant compromise needed to end the nearly 14-month trade war. The protracted dispute has stoked fears about a global recession, shaking investor confidence and prompting central banks around the world to ease policy in recent months.
In an interview on CNBC, Federal Reserve Bank of Cleveland President Loretta Mester said she viewed the Chinese retaliatory tariffs as “just a continuation” of the aggravated trade policy uncertainty that has begun weighing on US business investment and sentiment.
Agriculture, auto sectors hit
The knock-on effects of the US-China trade dispute was a key reason behind the Fed's move to cut interest rates last month for the first time in more than a decade.“It is unclear as things stand whether the US-China trade negotiations will continue as planned in early September,” said Agathe Demarais, global forecasting director at the Economist Intelligence Unit, in an e-mail statement.
"All eyes will now turn to the US Fed to see whether Jerome Powell, the Fed Chairman, will react to these developments by accelerating rate cuts." In a keynote speech at the Fed's annual central banking conference in Jackson Hole, Wyoming, on Friday, Powell said the US central bank would "act as appropriate" to keep the economy
healthy but did not say how fast it might cut rates.
Among US goods targeted by Beijing's latest tariffs were soybeans, which will be hit with an extra 5 per cent tariff starting Sept. 1. China will also tag beef and pork from the United States with an extra 10 per cent tariff.
China is also reinstituting an additional 25 per cent tariff on US-made vehicles and a 5 per cent tariff on auto parts that had been suspended at the beginning of the year. Carmakers such as Daimler and Tesla had adjusted their prices in China when the auto and auto parts tariffs had been suspended.
Ford, a net exporter to China, said in a statement it encouraged the United States and China to find a near-term solution. “It is essential for these two important econom¬ies to work together to advance balanced and fair trade,” the company said.