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Stocks Fall as China Responds to U.S. Tariffs Stocks Fall as China’s Response to U.S. Tariffs Stokes Economic Anxiety
(about 2 hours later)
Stocks fell on Wall Street again on Monday, after Beijing said it would impose new levies on goods from the United States in response to tariffs imposed by the Trump administration on Chinese imports last week. Stocks tumbled on Monday, accelerating a recent downturn fueled by investors’ beginning to factor a worsening trade war into the outlook for an already slowing global economy.
China’s finance ministry said that starting June 1, it would raise tariffs on a wide range of American goods to 20 or 25 percent from 10 percent. Sharp drops on Wall Street and in European markets came after China’s finance ministry said that starting June 1, it would raise tariffs on a wide range of American goods to 20 percent or 25 percent from the current 10 percent.
The move, announced just before the start of trading in the United States, was a response to the Trump administration’s pledge to increase its own levies on Chinese products, and the reaction in financial markets was swift.
The S&P 500 fell more than 2 percent soon after trading began in New York, and declines in Europe steepened.
After dropping 2.2 percent last week, the benchmark index is down more than 4 percent this month.
Shares of companies particularly dependent on trade with China, including semiconductor makers that rely on production networks in the country, fared badly. Apple, which counts China as a major market for the sale of its iPhone and other devices and leans heavily on Chinese suppliers to produce them, fell more than 4 percent.
Boeing, one of the largest exporters in the United States dropped more than 3 percent. Wynn Resorts, which is heavily reliant on casino operations in Macau that cater to gamblers from mainland China, fell about 6 percent.
[Read more about China’s response here.][Read more about China’s response here.]
The S&P 500 fell more than 1.5 percent at the start of trading in New York, with an especially sharp tumble among semiconductor shares. Chip companies are particularly vulnerable to trade tensions with China because they are dependent on production networks in Asia. As stocks have wobbled over the past week, some analysts have argued that a decline was long overdue for a market that soared to a record high in the first four months of the year. There was a shift after President Trump dashed hopes that a trade deal between the world’s two largest economies was near. On Friday, Mr. Trump raised tariffs on $200 billion worth of Chinese-made goods.
Shares of Apple, which counts China as a major market for its devices and also manufactures in the country, were down more than 5 percent, while aircraft maker Boeing fell more than 3 percent. But signs of economic anxiety also appeared in other financial markets on Monday. The price of Treasury bonds rose, as investors sought the safety of government securities. Prices for soybeans and copper, both of which are sensitive to global growth and trade, dropped. Interest rates rose in corporate bond markets, an indication that investors were seeking higher premiums in response to the increased economic risks of a worsening trade fight.
The sell-off in the United States continued last week’s market weakness, when the S&P 500 dropped 2.2 percent in its worst weekly performance of the year. Stocks in Europe added to earlier losses in afternoon trade on Monday, with the CAC 40 index in France and the Dax in Germany down by more than 1 percent. “This would essentially be another thorn in the global economy’s side,” Gregory Daco, chief U.S. economist at consulting firm Oxford Economics.
The recent turbulence has been notable for a stock market that soared in the first four months of the year, hitting a record high in April. The shift began after President Trump dashed hopes that a trade deal between the world’s two largest economies was near, instead threatening more action by the United States government and promising that his administration would take its time to reach a deal. Although the global economy continues to expand, the pace of growth in has slowed in recent months in much of the world. On April 9, the International Monetary Fund reduced its growth forecast for 2019 to 3.3 percent, which would be among the slowest annual paces in the past decade. In adjusting its forecast, the fund citing, in part, the tensions between China and the United States. It also said it expected about 70 percent of the global economy to slow this year.
On Friday, Mr. Trump raised tariffs on $200 billion worth of Chinese-made goods. Talks between American and Chinese officials in Washington ended that day with the two sides still far apart on a number of issues. Stocks in Europe added to earlier losses in afternoon trade on Monday, with the CAC 40 index in France and the Dax in Germany down by more than 1 percent.
[Read more about the last week’s stock market turbulence.]
In Asia, where trading ended before Beijing’s tariff announcement, the Shanghai Composite Index fell 1.2 percent, and the Shenzhen Composite Index fell 1.1 percent. In South Korea, the Kospi index fell 1.4 percent, Taiwan’s Taiex index fell by a similar amount and Japan’s Nikkei 225 index lost 0.7 percent.In Asia, where trading ended before Beijing’s tariff announcement, the Shanghai Composite Index fell 1.2 percent, and the Shenzhen Composite Index fell 1.1 percent. In South Korea, the Kospi index fell 1.4 percent, Taiwan’s Taiex index fell by a similar amount and Japan’s Nikkei 225 index lost 0.7 percent.