Stocks down again after Trump says China "broke the deal"
Stocks fell again on Thursday amid heightened concerns about a growing trade war between China and the U.S., following President Trump's comment on Wednesday that he wants to raise tariffs on Chinese imports because the country "broke the deal." The comment comes ahead of a deadline on Friday to raise tariffs if a deal isn't reached.
The Dow fell 139 points, or 0.5 percent, to 25,828 on Thursday. Earlier in the day, the index had declined about 450 points but recovered in the afternoon after Mr. Trump said it was still possible to reach a trade deal this week, according to Bloomberg News.
Other indices were also lower, including the tech-heavy Nasdaq composite, down 0.4 percent. The S&P 500 slipped about 0.3 percent, putting the popular benchmark for U.S stocks on track for its worst week of the year, with a loss of around 2.5% since Monday.
The negative tone that has gripped markets this week was triggered Sunday by a Twitter threat from Mr. Trump to go ahead with plans to impose more tariffs on Chinese goods this Friday. The U.S. government has since filed plans to raise tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent. The Trump administration has also threatened to extend 25 percent tariffs to another $325 billion in Chinese imports, covering everything China ships to the United States.
The global markets have shed $1.36 trillion between Mr. Trump's tweet on Sunday to boost tariffs and Wednesday, according to a Bloomberg calculation. Mr. Trump's comments at a Wednesday evening campaign rally in Florida added to the anxiety felt by investors, who are concerned an escalating trade war will crimp economic growth and eat into corporate profits.
"[T]he vice premier tomorrow is flying in — good man — but they broke the deal," Mr. Trump said, referring to Liu He, China's chief negotiator, at the Florida rally, according to Axios. "They can't do that, so they'll be paying."
On Thursday, Beijing said it will impose "necessary countermeasures" if the increases take effect as planned, the ministry said. It gave no details but a ministry spokesman said Beijing has made "all necessary preparations," suggesting it might be bracing for worsening conflict.
Such moves would mark a sharp escalation in the trade dispute that has raised prices on goods for consumers and companies. The tariffs -- levies paid by consumers and companies, not China -- could cost an average American family of four $767 a year, one study from a U.S. group called the Trade Partnership estimated in February. The advocacy group also forecast the tariffs would cut U.S. employment by 934,000 people and subtract roughly 0.4 percentage points from U.S. GDP.
Negotiations on eve of tariffs hikes
Negotiations are scheduled to continue in Washington on Thursday, and to include China's top trade official, raising some hopes in the markets that there will be a last-minute deal to prevent another round of tariffs.
"With representatives from both sides meeting for a final time ahead of tomorrow's potential tariffs increase, many will see Trump's tone as yet another move in a high-stakes chess game which clearly has further to run," said Joshua Mahony, senior market analyst at IG.
The possibility that the dispute could escalate represents a marked shift from just a few weeks ago, when talks between the U.S. and China appeared to be on track for an agreement. Hopes for a deal contributed to double-digit gains in all the major indexes so far this year.
The U.S. and China have already raised tariffs on tens of billions of dollars of each other's goods in their dispute over U.S. complaints about Beijing's industrial and technology policies and a perennial U.S. deficit in trade with China.