Risk Off, Safe Haven Buying On Amid Speculation of New Tariffs on China by Trump Administration

Early Wednesday, the financial markets are showing signs of safe haven buying and the liquidation of higher risk assets amid speculation that President Trump is poised to bring the U.S. closer to a full-fledged trade war with China by announcing another round of tariffs against Beijing.

At 2241 GMT, September E-mini S&P 500 Index is trading 2778.00, down 19.25 or -0.68%. September 10-Year Treasury Notes are at 120’10, up 0’09.5, or +0.25%. T-Notes move opposite of yields, so this means yields are falling. This is likely to put pressure on the U.S. Dollar unless investors decide to treat the Greenback like a safe haven.

In the Forex market, the Dollar/Yen is trading 110.870, down 0.181 or -0.16%. This indicates investors are moving money into the safe haven Japanese Yen. China’s two close trading partners, the Australian and New Zealand Dollars are also under pressure. The AUD/USD is at .7426, down 0.0032 or -0.43% and the NZD/USD is trading .6820, down 0.0015 or -0.19%. The trade is brisk and volume is above average.

According to Bloomberg, President Trump is preparing to release another list of an additional $200 billion in Chinese products to be hit with a fresh round of tariffs, according to two people familiar with the matter.

“The list could be released as soon as Tuesday, and likely this week”, according to Bloomberg sources. The news service also noted that the publication of the list starts a weeks-long process that includes a public-comment period and hearings.

On July 6, the Trump administration imposed 25 percent duties on $34 billion in Chinese imports, the first time the president has implemented tariffs directly on Beijing after threatening to do so for months. China immediately retaliated with duties on the same value of U.S. goods, including soybeans and cars.

Additionally, the U.S. is currently considering levying duties on a further $16 billion in Chinese goods, after a public hearing later this month. China has vowed to retaliate dollar-for-dollar to any further U.S. tariffs.

The news hit the stock market hard late Tuesday after investors had driven prices higher on the back of the start of earnings season and dampening concerns over the trade dispute. The early price action in the financial markets indicates that investors are not going to wait for the announcement and would rather take protection sooner than later.