The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is set to finish the week with a day in the red after President Trump signed an executive memo ordering U.S. Trade Representative Robert Lighthizer to levy tariffs on at least US$50 billion (A$65 billion) in Chinese imports.
According to the memo, the President has instructed the Trade Representative to publish a proposed list of products and any tariff increases within 15 days of today's announcement.
Fears that this could spark a trade war has led to the Dow Jones Industrial Average falling over 700 points or almost 3% overnight.
According to Bloomberg, Cui Tiankai, China's ambassador to the U.S. has warned President Trump that it would return fire on the tariffs, saying the American middle class would ultimately pay the price.
In addition to this, the ambassador said on the embassy's Facebook page that: "We don't want a trade war, but we are not afraid of it." Before going on to say that China "will certainly fight back and retaliate. If people want to play tough, we will play tough with them and see who will last longer."
What about the Australian share market?
At the time of writing the Australian market is poised to open sharply lower. Futures are currently pointing to an 89-points decline at the open, equivalent to a 1.5% decline.
Although this is largely a US-China issue at this stage, there are concerns that this could escalate into a global trade war.
Should a global trade war commence, Australian businesses that export a significant amount of goods could be hurt. Companies such as A2 Milk Company Ltd (ASX: A2M) and Treasury Wine Estates Ltd (ASX: TWE) spring to mind.
What now?
It is still early days, of course, and there's still a lot of unknowns.
So, I would suggest investors don't panic too much over this latest news and look to use today's market sell-off as a buying opportunity to pick up some quality shares at a more attractive price.
