Virtually all economists agree that restricting trade has damaging economic consequences for all countries that employ such policies, but the scale and the scope of the losses are potentially huge, not just for the US and China, but also for countries not directly involved.
Miffed by Pompeo's comments, China today hit back saying that the U.S. is making allegations to cover up its unilateral protectionist policies. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the French CAC 40 Index and the German DAX Index slumped by 1.1 percent and 1.2 percent, respectively. Boeing (NYSE:BA) shares are down 8% in the last five sessions, while shares of 3M Company (NYSE:MMM) and Caterpillar (NYSE:CAT) have also been generating big losses. That compares with 11.4 percent for Malaysia and only 2.2 percent for Vietnam.
The sell-off came after President Donald Trump threatened to impose tariffs on an additional $200 billion in imports from China, and the Chinese government said it would retaliate. With bond yields falling, some investors bought high-dividend companies like utilities and companies that make and sell household goods.
"Our view is that these actions are necessary to defend this country, and that they are ultimately bullish for Corporate America, for the working men and women of America, and for the global trading system", he said.
US stocks are mostly higher Wednesday as technology and media companies lead a recovery from the turbulent trading seen the day before.More news: Italy's interior minister turns gaze to 'Roma question'
Spot gold dropped 0.3 percent to $1,274.66 an ounce.
"The focus shifts from central banks back to trade", observed Craig Erlam, senior market analyst at Oanda trading group. US crude oil is up 1.3 percent, after dropping 1.2 percent a day earlier. Soybean futures sank 3.2 percent.
The potential tariffs released on Monday are in retalitation to that statement from China.
The Dow slid 42.41, or 0.2 percent, to 24,657.80. The S&P and the Nasdaq also fell.
While Trump is said to have rejected China's offer early this month to increase purchases of US goods by $70 billion, Chinese Foreign Ministry spokesman Geng Shuang said on Wednesday the two sides had made progress in their three rounds of talks.More news: England less threatening than Belgium, says Panama's Rodriguez
A rush to beat the tariffs imposed by the USA and China in the latest trade spat could spark a change in freight movements and rates. China immediately promised to retaliate. The Shanghai Composite Index fell 3.8 percent and Hong Kong's Hang Seng lost 2.8 percent.
Oil prices headed sharply lower on expectations that OPEC and other major oil producers will announce a decision to raise production at a meeting later this week.
Freeland once again hit back against the Trump administration's suggestion that Canadian-made steel and aluminum poses a national security threat to the US, calling the idea absurd and "insulting".
The Canadian dollar averaged 75.32 cents USA, down 0.39 of a United States cent, as it continues to face the twin pressures of rising U.S. rates and trade fears, especially related to NAFTA.
A trade spat between the top two economies of the world began in April with Mr Trump imposing tariffs on steel and aluminium imports into the U.S. from China, which also retaliated by imposing additional tariffs worth about $three billion on 128 United States products.More news: Michael Horowitz: Justice Department investigating Comey memos
Beijing immediately retaliated by matching the USA levy, but Mr Trump asked officials on Monday to identify $200bn of Chinese goods to be subject to a 10% tariff.