European markets drop after Trump's latest tariff warning
Photo:
RNZ / Rebekah Parsons-King
European markets have mostly fallen today while Asia was mixed as investors digested Donald Trump's latest trade war salvos that saw him threaten to hit the European Union and Mexico
with 30 percent tariffs
.
The US president's outburst came after a series of announcements last week, including warnings of 50 percent levies on copper and Brazilian goods, 35 percent on Canadian goods, and a possible 200 percent charge on pharmaceuticals.
While observers warn the measures could deal a hefty blow to the global economy, investors are largely optimistic that governments will hammer out agreements before the White House's 1 August deadline.
In announcing his latest measures on Saturday, Trump cited Mexico's role in illicit drugs flowing into the United States and a trade imbalance with the European Union.
The move threw months of painstaking talks with Brussels into disarray.
European Commission chief Ursula von der Leyen has insisted the bloc still wants to reach an accord -- and on Sunday delayed retaliation over separate US duties on steel and aluminium as a sign of goodwill.
EU officials threatened in May to impose tariffs on US goods worth about 100 billion euros (NZ$195 billion), including cars and planes, if talks fail.
The bloc's trade chief Maros Sefcovic said he planned to speak to his US counterparts Monday, adding that he "cannot imagine walking away without genuine effort".
French President Emmanuel Macron backed efforts to reach an agreement that "reflects the respect that trade partners such as the European Union and the United States owe each other".
But he urged the bloc to "step up the preparation of credible countermeasures" if the two sides fail to reach an agreement.
Analysts also pointed out that the levies against Mexico and Canada come even after Trump agreed a trade deal with the two during his first administration.
Shares fell in Frankfurt and Paris, though London ticked higher.
In Asia, Hong Kong, Shanghai, Seoul, Singapore, Manila, Bangkok and Jakarta all rose, while Tokyo, Sydney, Taipei, Mumbai and Wellington edged down.
Bitcoin hit a new record high of $122,582.
"It is hard to say whether the muted market response over the week is best characterised by resilience or complacency," said National Australia Bank's Taylor Nugent.
"But it is difficult to price the array of headlines purportedly defining where tariffs will sit from 1 August when negotiations are ongoing."
Data showed Chinese exports jumped more than expected in June after Washington and Beijing agreed a tentative deal to lower swingeing levies on each other.
That included a 32.4 percent surge in shipments to the United States, having dropped in May.
Traders are also keeping a nervous eye on the Federal Reserve as Trump continues to berate boss Jerome Powell for not cutting interest rates soon enough, saying Sunday "I hope he quits", and adding "He should quit".
Reports also said the president's allies were targeting the Fed chief over his handling of an expensive renovation at the bank's headquarters, with some suggesting they were building a case to have him removed over it.
However, strategists warned that such a move would bring the independence of the central bank into question and send US Treasury yields soaring and the dollar plunging.
- AFP
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But the draft agreement stops short of granting independence from France, and involves significant compromises from parties on each side of the debate. Observers say regardless of Macron's enthusiasm, the deal faces a long and uncertain path before it can take effect. They also say the proposal has no clear parallels, and will need explaining to the New Caledonian public, set to vote on it in a February referendum. So, how did it get to this point, how would the agreement work, and what needs to happen for it to take effect? Pro- and anti-independence groups, along with French officials, were locked in negotiations for 10 days. They were tasked with reaching a deal settling New Caledonia's future relationship with France. Ever since a majority of New Caledonians rejected independence from France in three referendums - including in a controversial third vote boycotted by pro-independence groups - leaders had not been able to agree on the way forward. Finally, parties resumed talks in February, a milestone that was lauded as an achievement in itself after tensions spilled over into violent unrest last year. Manuel Valls succeeded in bringing pro- and anti-independence groups back together. Photo: AFP / Delphine Mayeur But progress was initially slow, and despite efforts from France's Overseas Minister Manuel Valls to encourage compromise, early talks in New Caledonia didn't lead to an agreement. The discussions then shifted to Bougival, near Paris, this month when Macron convened and parties tried again. Again, it appeared there would be no breakthrough, according to Denise Fisher, former Australian consul-general in New Caledonia. "It looked like everything was just going sour," she said. The talks changed course on Friday afternoon, when pro-independence leaders consulted with their political bureau until the early hours of the morning, before meeting with Valls at 1am. When he convened the rest of the group at 6am on Saturday, a draft agreement was made. That evening, the parties announced the accord in a gilded hall at the Élysée presidential palace in Paris. The 13-page agreement calls for a "state of Caledonia" within the French Republic, which would be enshrined in France's constitution and could be recognised by other nations. It would also establish a "Caledonian nationality", letting residents combine that status with French nationality. The deal calls for an economic and financial recovery pact that would include a renewal of the territory's nickel processing capabilities. A special congress will be held to finalise next steps, which could include more sovereignty for New Caledonia over issues of international affairs, security and justice, according to excerpts published by New Caledonia's public broadcaster. The accord could also eventually allow New Caledonians to change the territory's name, flag and hymn. But it doesn't grant independence to New Caledonia, whose status as a "state" would be inscribed within French laws. While it would give it some measure of autonomy over its foreign affairs, these would have limits stopping it from clashing with France's interests overseas, experts say. One potential clash could be the destination of its vast nickel reserves - which New Caledonia might want to sell within the region, but that France wants to stay within the European Union, Pacific journalist Nic Maclellan said. And under the agreement New Caledonia residents will, in the future, be allowed to vote after living 10 years in the archipelago - one of the primary issues that ignited the territory's civil unrest last year. France still has territories across the Pacific, giving it access to resources like nickel. Photo: ABC News / Jarrod Fankhauser It would differ from deals between other Pacific nations and their former colonial rulers, such as the "free association" agreement that gives Cook Islands broader power over its affairs from New Zealand. But it remained unclear how the arrangement - creating a state within a nation state - would work, Mr Maclellan said. He said there was no clear parallel elsewhere. "There's absolutely no precedent in French law - and this whole deal is framed in French law," he said. Macron - and the parties striking the deal - have been eager to promote it. Valls described it as "intelligent compromise". Emmanuel Tjibaou, New Caledonia's pro-independence member of the French National Assembly and son of the late independence movement leader Jean-Marie Tjibaou, said the accord would help "us get out of the spiral of violence". Emmanuel Tjibaou says the proposal negotiated in France will help end violence in New Caledonia. Photo: AFP / Delphine Mayeur He described a ''difficult path'' ahead but one that would allow Kanaks and other Caledonians to move forward together while mending divisions. On the anti-independence side, politician Nicolas Metzdorf called it a compromise born of "demanding dialogue", and described the Caledonian nationality as a "real concession''. In Paris, the proposal will need support from France's National Assembly, which will vote on enshrining the changes in the constitution. And, it will need to pass a referendum in New Caledonia, where the proposal has already met backlash from some quarters. Anti-independence groups have long voiced their opposition to splitting New Caledonia from France. Photo: AFP / Theo Rouby Those who signed the draft agreement admitted during a meeting with Macron on Saturday evening that they were struggling to win over opponents of the deal. New Caledonian journalist Brigitte Whaap said while members of the public were relieved there had been progress and an agreement was proposed, some members of the pro- and anti-independence groups felt differently. "They are the ones who are feeling the most sensitive to it," she said. "They're feeling betrayed, really upset about this situation." Philippe Blaise, the anti-independence first vice-president of Southern Province government, said the agreement "crossed a red line" by recognising a "Caledonian state" and a "distinct nationality", which he said was incompatible with French unity. The draft agreement will need the backing of pro-independence supporters within New Caledonia. Photo: AFP / Delphine Mayeur Some pro-independence activists also took to social media to condemn the deal. Brenda Wanabo-Ipeze, a leader of the pro-independence group CCAT, currently incarcerated in France, said: "This text was signed without us. It does not bind us." Melanie Atapo, president of the pro-independence USTKE union, which represents Kanak people, said she was "surprised" by the agreement and that the signatories should "come back to share with the bases before signing". Joel Kasarerhou, president of civil society group Construire Autrement (Build Differently), called the agreement "stillborn", describing it as "lacking ambition and vision". Kasarerhou said the youth at the heart of the May 2024 uprising had been "forgotten or barely mentioned". He feared another "May 13" - the date the 2024 riots began. The pro-independence Kanak and Socialist National Liberation Front (FLNKS) said in a statement on Monday that the agreement included "major advances towards the objective of bringing together, over time, all the elements of sovereignty". "At a difficult time for our country, marked by a deep political, economic and social crisis, we, the group mandated by FLNKS have assumed responsibility," it said. "All the elements set out in the draft agreement will be submitted to our structures for approval, with a view to a collective debate on the next steps to be taken, and to informing the public." Maclellan said political leaders now had to return from Paris and sell the agreement to the public. "To ordinary New Caledonians, there's going to be a lot of questions." -ABC/AFP