U.S. stocks tumbled after President Donald Trumpover technology policy by threatening a tariff hike on an additional $200 billion of Chinese goods.
Amid plunges across global markets, U.S. markets also fell sharply on Tuesday with the Dow turning negative for the year after falling 287 points to close at 24,700. The Standard & Poor's 500 index and Nasdaq composite index both fell by as much as one percent in midday trading before ticking slightly higher to close down 0.4 percent and 0.3 percent respectively.
Global industrials led the declines for the Dow, with aircraft maker Boeing closing down 3.8 percent, chemical manufacturer DowDupont falling 2.1 percent and heavy machinery giant Caterpillar sliding 3.6 percent. All have significant international revenuethat could be upended by tariffs and trade wars.
President Trump on Monday directed the U.S. Trade Representative to prepare new tariffs on $200 billion in Chinese imports as the two nations moved closer to a potential trade war. The tariffs, which Mr. Trump wants set at a 10 percent rate, would be the latest round of punitive measures in an escalating dispute over the large trade imbalance between the two countries.
Mr. Trump recently ordered tariffs on $50 billion in Chinese goods in retaliation for intellectual property theft. The tariffs were quickly matched by China on U.S. exports, a move that drew the president's ire.
"Most observers outside the Trump administration think that a trade war between the U.S. and China will lead to losses on all sides," Oxford Economics analysts said in a research note. "With the Trump team apparently of the view that the U.S. can win trade wars, and China determined to fight one if it ensues, it increasingly looks like we cannot preclude a full-blown trade war between the world's two largest economies."
Mr. Trump accused Beijing of being unwilling to resolve the dispute over complaints it steals or pressures foreign companies to hand over technology. China's Commerce Ministry criticized the White House action as blackmail and said Beijing was ready to retaliate.
Stocks in France, Germany and the U.K. also fell, while Asian markets also declined.
"President Donald Trump's unwillingness to back down became apparent this morning, once again sinking markets into a risk-off atmosphere," Jingyi Pan of IG said in a report. Pan said market attention turned to China for "signs of further retaliation."