Dow Plunges 700 Points As China Hikes Tariffs On US Goods

Article From nypost.com | By Carleton English and Kevin Dugan | May 13, 2019 9:56am | Updated

 

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An escalating trade war between the US and China threw the stock market into chaos on Monday.

The Dow Jones industrial average plunged more than 700 points after China said it will hike tariffs on $60 billion worth of US goods — a tit-for-tat response to President Donald Trump’s hike of tariffs on $200 billion in Chinese goods last week.

The plunge — which recently stood at more than 709 points, leaving the Dow at 25,233.32 — threatened to be the biggest single-day drop since Dec. 4 when recession jitters triggered a major selloff.

Investors were sent scrambling after China said it plans to impose tariffs on its US imports of to up to 25 percent on June 1.

The selloff intensified throughout the day, as investors appeared to less optimistic that a deal could be struck.

“Unless a deal can be struck quickly in the coming weeks, markets will need to prepare themselves for an extended period of economic trench warfare,” David Bianco, CIO at DWS Research, said in a Monday note.

The tumble follows last week’s market rout, in which the Dow tumbled 562.58 points and the S&P 500 and Nasdaq saw their worst weekly drop of 2019.

Traders were already anticipating a weak open on Monday as President Trump criticized China for backing out of last week’s proposed trade deal in a series of tweets early Monday.

“You had a great deal, almost completed, & you backed out!” Trump tweeted.

China’s surprise retaliatory measure had Wall Street selling as it tried to reckon how US companies would fare with tariff pressures on both sides.

Apple shares were down 5.2 percent, while Caterpillar and Boeing — which rely heavily on business from China — were down 5.0 percent and 4.1 percent.

“[Tariffs] could make businesses uncertain and scramble to figure out their supply chains,” Chris Rupkey, chief financial economist at Mitsubishi UFJ Financial Group, told The Post.

“It’s very difficult for companies to disentangle themselves from their China operations,” he added.

On Friday, the US raised tariffs on $200 billion of Chinese goods to 25 percent from 10 percent and hinted more tariffs could come if a deal is not reached.

Last week’s tough tariff talk sent global markets into the red, marking the worst week of 2019.

“It would be a disaster for the economy” if full tariffs were enacted, Rupkey said.

 “The way companies have done business for over 20 years would be turned upside-down overnight.”

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