Updated June 17, 2018 07:11:24

Photo: The soybean market crashed on news of China's retaliatory tariffs. That's bad news for US farmers and Chinese families. (REUTERS: Stringer/File Photo)

The trade war salvos may be increasing in intensity but, unusually, Wall Street isn't ducking for cover.

Having unloaded on allies in Canada, Europe and Mexico, the Trump administration adjusted its aim to China.

In its sights, 818 products imported from China — valued at $US50 billion per year — will cop a punitive 25 per cent tax on the way in.

It is upping the ante in a high stakes game, but what are the implications of President Trump targeting hi-tech Chinese imports?

China's retaliation was swift — 659 US products, also valued at $50 billion, will also get weighed down with a 25 per cent tariff.

The Chinese target is somewhat broader than the original 106 products listed, but US aircraft has been left off, and energy products such as oil, gas and coal have been added.

While the tariff missiles were whizzing over overhead, Wall Street sold off a bit of risk to close the week broadly flat.

Elsewhere, traders were less insouciant.

Europe fell after having shown some optimism earlier in the week and emerging markets — which are often hit by a dislocation of global trade — also tumbled.

The ASX, having enjoyed one of its biggest bounces of the year on Friday, looks to be in a holding pattern judging by futures trading over the weekend.

Equities 'comfortably numb'

Wall Street's reactions to initial hostilities in March were far more severe.

"The market has gotten reasonably comfortably numb to this tariff stuff," Chuck Carlson, chief executive at Horizon Investment Services told Reuters.

"They are becoming more accustomed to this being a first foray and negotiating tool," Mr Carlson said.

However there is a sense the trade uncertainty is chiselling away at the confidence of many sectors Mr Trump champions.

Despite the protective shield being built around US Steel and its workers, the company shares have dropped about 14 per cent since March on fears global demand will plummet.

The industrial giants, Boeing and Caterpillar, aren't enjoying things as well.

Car makers are stalling on the prospect of having to pay more for steel and aluminium.

In the farm sector, Bunge — the world's biggest oilseed processor — is down 7 per cent in the past couple of months.

Another big fund manager and head of Chase Investment Counsel, Peter Tuz, says markets shouldn't get too complacent with a "cry wolf" attitude.

"The prospects of a trade war are fairly significant," he said.

"It's just an uncertainty that investors haven't had to deal with for a long time."

Photo: After initial anxiety in March, Wall Street appears to have shrugged off the US-China tariff war as an issue. (Supplied: Thomson Reuters Datastream)

Resource and agricultural commodities under the pump

Understandably, commodity markets with their global focus seem to have more finely attuned antennae for the potential damage of a trade war.

Soybean futures dropped more than 2 per cent on Friday to there lowest level in more than a year as China retaliated.

China is the biggest buyer of US soybeans, shipping in around $16 billion a year. Corn and wheat futures fell too, but more modestly.

Growers of the big US summer crop of sorghum were hit hard in April by a sudden cancellation of orders from Chinese traders early in the bilateral hostilities.

The US steel index tumbled almost 2.5 per cent, but the biggest action was in oil markets.

Photo: Copper and the big miners like BHP and Rio Tinto took a pounding from an escalation in the US China tariff war (Supplied: BHP)

China's decision to throw US oil, gas and coal in the mix, along with the likely decision by OPEC and Russia to lift production, saw the key global benchmark Brent crude fall 3.3 per cent in Friday's trade.

It is a big deal.

China, along with Canada, are the biggest importers of US crude at around 360,000 barrels a day.

It is also an increasingly big buyer of US gas.

Miners and minerals also had a rough end to the week.

Copper, a traditional bellwether of the health of global trade, fell more than 3 per cent and at $US6,300 a tonne is cheaper than it was at the start of the year.

The big miners' US listings where sold off. BHP was down 4.5 per cent in New York, Rio Tinto fell 3.6 per cent and Brazil's Vale — the world's biggest iron ore and nickel producer — lost almost 6 per cent of its value.

While the Wall Street equity traders remain "comfortably numb", not so the traders at the world's biggest commodity dealer, Cargill.

"The impact of trade conflict between the world's two largest economies will lead to serious consequences for economic growth and job creation and hurt those that are most vulnerable across the globe," Cargill said in a statement in response to the latest tit-for-tat tantrum.

It is a message that always seems to get lost in the heat of battle between nations.

Central bankers meet

It may not knock off the World Cup as a global spectacle, but for monetary wonks the gathering of the world's leading central bankers in Portugal this week is a big deal.

The three-day event (ending Wednesday) will be marked by the arrival of the rookie-of-the-year, US Federal Reserve Chair Jerome Powell.

He'll be speaking on a panel with the likes of the ECB's "Super" Mario Draghi, the Bank of Japan's Haruhiko Kuroda and RBA governor Philip Lowe.

Apart from that, it all looks a bit dreary on the macro front.

The ABS trots out its first quarter home price index (Tuesday) which will tells us what we already know. Home prices are falling.

The ABS also publishes its latest quarterly measure on population growth (Thursday).

Anxious Telstra investors may get some idea about management's plans to turn around the fortunes of the somewhat diminished, but still dominant telco at its strategy day (Wednesday).

Telstra rallied last week on expectations a grand plan will be announced. A retreat is likely if it doesn't meet those lofty expectations.

Australia

Overseas

Topics: trade, agricultural-crops, oil-and-gas, mining-industry, economic-trends, company-news, markets, australia

First posted June 17, 2018 06:34:18