China retaliates to US trade measures with their own tariffs amounting to $50 billion as well
The tariffs announced here includes that of soybeans and aircrafts - two of the highest valued US exports to China. That shows you the level of seriousness that China is taking this so-called trade war already.
Trump and Xi will eventually need to find a way to settle this, but can there be a resolution without one party losing their ego? That's highly unlikely the further this drags on.
The main worry for markets is that this will extend beyond trade tensions and escalate to political tensions between the two countries. Trump has constantly reiterated that he maintains a good relationship with Xi but how much that has changed over the last few months is something we all probably can't answer at this point.
The real fear is that the relationship has turned sour following the recent trade spat and that we may see further deterioration in the relationship between the two countries. That is going to be a bad omen for markets and geopolitical tensions in general.
Now in terms of measures by China, as they already unloaded two of their big guns, they're still keeping a key tool in their armoury. That's the Chinese yuan.
While the US will come under massive scrutiny in terms of attempting to manipulate its currency (think Mnuchin comments earlier in the year), the PBOC certainly has no qualms in "tweaking" its fixing formula to determine the yuan exchange rate - it wouldn't be the first time.
And the yuan weakness will be a weapon the Chinese camp can count on if things are to escalate further in due time.
What a day it has been. This basically sums up the headlines today:
