The Dow Jones Industrial Average, one of the best-known U.S. stock market gauges, tumbled the most since a January government shutdown after President Trump threatened harsh new tariffs on Chinese imports that would drive up consumer costs.
Irritated by delays in reaching a trade deal with Beijing that negotiators had been working on since last fall, Trump threatened via Twitter on Sunday to more than double tariffs on $200 billion of Chinese imports to 25% and tack duties of the same level onto the remaining $325 billion in goods the U.S. buys from the world’s second-largest economy.
“This is a big deal,” said Chris Krueger, an analyst with Cowen Washington Research Group, which has analyzed federal policy for the past four decades. “The final tranche of goods is almost all consumer goods,” compared with previous imports, which affected largely capital equipment for businesses and other items that don’t hit voter budgets directly.
The blue-chip Dow tumbled 1% to 26,239 on Monday morning, paring earlier losses, while the broader S&P 500 fell 0.98% and the tech-heavy Nasdaq composite slid 1.2%.
The drops reflected a sharp decline in investor hopes that Trump could reach a trade deal with Chinese President Xi Jinping after imposing tariffs that irked Republican lawmakers and threatened to undermine economic growth spurred by GOP-led tax cuts and looser regulations on businesses.
“This is the most significant escalation of the U.S.-China trade war to date,” said Aditya Bhave, a global economist with Bank of America. “Markets could be in for a bumpy ride before a trade deal is reached.”
While the White House had long threatened to impose tariffs on all Chinese imports to eliminate a trade imbalance with the country, the administration had paused levy increases for three months after Trump and Xi decided to work toward a long-term agreement after a meeting in Buenos Aires in late November. The moratorium expired in early March, but Trump decided to stretch the timetable for talks.
That appeared to end on Sunday.
“The tariffs paid to the U.S.A. have had little impact on product cost,” Trump tweeted, contradicting statements from retailers who have warned for more than a year of rising supply costs from which many tried to insulate shoppers as much as possible. “The trade deal with China continues, but too slowly, as they attempt to renegotiate,” Trump said. “No!”
….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!
— Donald J. Trump (@realDonaldTrump) May 5, 2019
