European and Asian stock markets slid yesterday on worries of a possible trade war between China and the United States when Donald Trump takes over as president, analysts said. 

Chinese stocks were already under pressure from disappointment about Beijing’s lack of extra measures to boost China’s stuttering economy. 

The sell-off came despite another record close on Monday on Wall Street, fuelled by expectations that Trump will launch tax cuts and other business-friendly policies. Seen as inflationary measures that will keep interest rates high, the dollar was firm again yesterday. 

Trump’s support for cryptocurrency pushed bitcoin to a record high nearing US$90,000 at one point yesterday. The Republican has meanwhile pledged to impose tough tariffs on imports into the United States, including as much as 60% on goods from China. 

Trump’s decision to pick China hawks for key positions in his cabinet has added to fears the next few years could be bumpy. 

“The latest moves from Trump’s camp… are sending chills through the markets, and casting a decidedly icy glow on US-China relations,” noted independent analyst Stephen Innes. 

Analysts are also expecting tariffs on European imports, hurting the region’s top stock markets in London, Paris and Frankfurt, all of which were down around one percent nearing the half-way stage yesterday. 

Asia’s top equity indices closed with big losses – with Hong Kong finishing nearly three percent lower. 

The dollar extended gains against its peers that started after news of Trump’s election, which has sparked bets on a pick-up in inflation that could complicate the Federal Reserve’s plans to lower US interest rates. 

The latest reading of the US consumer price index due today will be closely watched as investors try to ascertain the central bank’s plans for next month’s monetary policy meeting. 

“We assume the Trump administration will deliver on their key policy propos, with the degree and timing of these policies the bigger uncertainty,” said National Australia Bank’s Rodrigo Catril. 

“Most of these policies (lower taxes, tariffs, immigration, deregulation, unfunded expansionary fiscal policy) can be regarded as pro-growth and/or inflationary. 

“This means, all else equal, a shallower Fed easing cycle and a stronger dollar,” Catril added. – Nampa/AFP