China, Europe warn trade war could trigger global recession

Beijing hopes to dominate ten high-tech sectors

Beijing hopes to dominate ten high-tech sectors

"Both parties agreed to oppose unilateralism and protectionism in trade relations", said Chinese Vice Prime Minister Liu He after a meeting with the European Commission Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen in Beijing.

"And that assessment does not include any other countries".

The broader S&P 500 closed at 2717.07, down 37.81 points or 1.4 per cent, marking its biggest one-day decline since early April.

Citing national security concerns, which the White House says encompass economic as well as traditional defense matters, Trump in late May announced plans to impose steep tariffs on Chinese goods, and then by June 30 to unveil "specific investment restrictions and enhanced export controls" tied to "industrially significant technology" that will apply to Chinese companies and investors.

A complicating factor for global investors is that the USA economy is expanding at a faster rate than Europe and Japan, while emerging markets such as China are weakening.

China and the European Union on Monday rejected unilateral and protectionist actions in worldwide trade, in a clear reference to US President Donald Trump's measures against Beijing and Brussels. New export controls would make it more hard for United States firms to sell technology to China if Washington deems it to be "industrially significant".

The US is due to impose tariffs on $34bn of Chinese imports from July 6, and Trump has threatened to impose levies on another $200bn of Chinese goods.

In response, the European Union has slapped additional tariffs on some 340 US products.

"The market is perceiving that politics will become policy", said Brian Battle of Performance Trust Capital Partners in Chicago. "The rhetoric is getting stronger rather than weaker".

After being relatively resilient in the trade war buildup - which has largely affected stocks of industrial exporters such as Boeing, Caterpillar, Harley Davidson and Alcoa - tech companies felt the lash of a selloff.

"We've moved away from the synchronous global expansion", says Principal Global Investors chief global economist Bob Baur, who believes global growth peaked around February of this year but that "the U.S. is still gaining momentum".

The S&P 500 Index closed down 1.35%, which says many USA investors believe the worst case scenario won't happen with a trade war and I hope they're right but we're gambling with the former casino owner called Donald Trump. The administration could expand the existing authority of the Committee on Foreign Investment in the United States, or CFIUS, which is led by the Treasury and which already has blocked Chinese investments, in ports and semiconductors.

Export controls, on the other hand, are the purview of the U.S. Commerce Department and the National Security Council.

By mid-afternoon, the S&P 500 was down 1.83%, and the Nasdaq had fallen 2.33%.

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