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Crunch Time For Trade Dispute: China To Retaliate

Tech stocks on Wall Street and the ASX plummeted again yesterday, their second dive in just 10 days. But the full crunch time has yet to come. Next week, August 19 to be precise, will be a defining moment in the US-China trade dispute.

That’s when President Trump’s 90-day exemption for US companies engaging in commercial activity with Chinese telecommunications networking giant Huawei, comes to an end.

Huawei has been a major sticking point in negotiations to resolve the dispute, but Trump is unlikely to apply another exemption period.

Investment bank Goldman Sachs says an escalation in the US-China trade war is inevitable if restrictions on Huawei Technologies aren’t lifted.

The latest tech stock plunge encapsulates the prevailing mood on Wall Street. Goldman Sachs says the likelihood of a trade deal priced by the equity market now stands at 13%, down from nearly 80% in April.

The investment bank says retaliation by China appears possible should the August 19 deadline pass without another extension.

The Dow index dropped 3.05%, its steepest percentage drop of the year and the fourth largest drop of all time.

The slump was led by tech stocks that now dominate the equity market, the Nasdaq Composite declining 3.02%. Wall Street-listed Australian outfit Atlassian was among the hardest hit, with its shares tumbling 4.91%.

Facebook plunged 4.64%; Alphabet 2.27%; Google, 2.71%; Apple 2.98%; Microsoft 3.1%, Netflix 4.2%, while e-commerce giant Amazon fell 3.36%.

Semiconductor companies also plunged, with Broadcom down 4.28%, Texas Instruments 2.22%, Qualcomm 1.8% and Intel fell 2.07%.

Back in Australia, the ASX mimicked Wall St yet again with new kid on the block Afterpay smashed, falling 6.7% as it wound up its first AfterYay sales event. Vocus, Superloop, Kogan and Reckon were down more than 5%; NextDC fell nearly 5%; while Dicker Data, TPG and Xero fell more than 3%.

There are still seven structural issues the US needs to settle with China through negotiations, including cyber intrusion into US business networks, forced technology transfer, intellectual property theft and currency manipulation.

It could be another two weeks before the negotiators talk again.

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