Morning Call For Wednesday, April 4

Overnight Markets and News

June S&P 500 E-minis (ESM18 -1.43%) this morning are sharply lower as China overnight very quickly retaliated to the Trump administration’s announcement late Tuesday of the list of $50 billion worth of Chinese products subject to tariffs for IP violations. The Euro Stoxx 50 index this morning is down -1.27%.

China’s retaliation was announced after some of the Far East Asian stock markets had already closed, which means that some of the Asian stock market closes do not reflect the news. The announcement was made about 20 minutes before the Hong Kong stock market closed, accounting for today’s plunge in the Hang Seng index by -2.19%. Other Asian closes: Japan Nikkei index +0.13%, China Shanghai -0.18%, Australian S&P 200 +0.16%, Singapore -2.12%, South Korea KOSPI 200 -1.54%, India -1.05%, Turkey -1.05%.

China early Wednesday very quickly announced the list of 106 U.S. products worth about $50 billion that will be subject to an additional 25% tariff in retaliation for the U.S. tariffs on $50 billion worth of Chinese goods. The list of U.S. products subject to the new tariff includes soybeans, automobiles, chemicals, and aircraft. Other U.S. ag products subject to the tariff include wheat, corn, cotton, sorghum, tobacco, and beef. The U.S. sold about $14 billion worth of soybeans to China last year accounting for about one-third of the entire U.S. soybean crop.

Boeing’s stock is sharply lower by -7% in overnight trading since the tariffs will apply to at least some Boeing jets. About one quarter of Boeing’s aircraft sales deliveries last year were to China. Boeing’s sharp drop accounts for the larger drop in Dow futures prices this morning versus S&P 500 futurs.

China said the implementation date for the tariffs will depend on when the U.S. levies its tariffs. The U.S. process is that there will be about a 60-day public comment period and then the U.S. Trade Representative has up to 6 months to decide on the final tariffs. Written public comments can be submitted until May 11 and a public hearing has been scheduled for May 15. That means there is still time for the two sides to negotiate to see if there is a compromise that could avert the tariffs.