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Stocks Dip After China Announces Retaliatory Tariffs on U.S. Goods China Vows Tariff Retaliation. Trump Fires Back. Stocks Tumble.
(about 3 hours later)
Wall Street stocks dipped and major European indexes fell on Friday after Beijing said it would answer President Trump’s next round of tariffs on Chinese goods by increasing tariffs on American imports, the latest sign that the trade war between the two countries could drag on. Stocks fell on Friday, after a new round of tariff threats between Beijing and President Trump pushed the market toward another weekly loss.
Dow Jones industrial average and S&P 500 futures had been up slightly as investors awaited a speech by Jerome H. Powell, the Federal Reserve chair, on Friday that they hoped would clarify whether the central bank would cut interest rates again next month as has been widely expected. Before the start of trading on Wall Street, China said it would answer the next round of American tariffs on Chinese goods by increasing tariffs on American imports. Around 11 a.m., Mr. Trump answered with a series of messages on Twitter.
But both indexes slid into negative territory at the start of trading after China’s government announced that it would retaliate against the Trump administration’s plans for two batches of tariffs on $300 billion in Chinese imports, on Sept. 1 and Dec. 15, with levies on $75 billion of American imports on the same schedule. “We don’t need China and, frankly, would be far better off without them,” he wrote, adding that he would respond to China’s tariff threat later in the day.
European markets, which rose in early trading on Friday, also tumbled after the tariff announcement by the State Council Tariff Commission in Beijing. The Euro Stoxx 50, the CAC 40 in France and the Dax index in Frankfurt were all down about 0.4 percent. Bucking the trend, the FTSE 100 in London was up 0.1 percent. In another Twitter message, Mr. Trump said that American companies were “hereby ordered to immediately start looking for an alternative to China.”
Asian markets ended trading mostly higher. Stocks, which had been climbing, promptly fell, as investors turned their attention away from a speech by Jerome H. Powell, the Federal Reserve chair, and back toward the continuing trade war between the world’s two largest economies.
On Friday, Mr. Powell noted that rising uncertainty surrounding the Trump administration’s trade policy was a challenge for the central bank. But he reiterated that the Fed would act as necessary to keep the more-than-decade-long expansion going. Financial market prices suggest investors are virtually certain the Fed will cut interest rates at its meeting next month.
Mr. Powell’s speech did little to change those expectations, giving the stock market a temporary respite, before the President’s statement on Twitter.
Energy stocks suffered some the steepest losses in the S & P 500, as crude oil prices dropped sharply. Tech stocks tumbled as did shares of semiconductor companies, which were down more than 3 percent. Both sectors have proven especially sensitive to indications that the trade battle between China and the United States was worsening.
China’s government announced that it would retaliate against the Trump administration’s plans for two batches of tariffs on $300 billion in Chinese imports, on Sept. 1 and Dec. 15, with levies on $75 billion of American imports on the same schedule.
It was the latest in the tit-for-tat trade battle that is shown growing signs of hurting the global economy. Evidence is growing that the global industrial sector is now in weakening. Germany, the trade sensitive economic engine of Europe, contracted in the second quarter. And growth in industrial production in China fell has fallen to its lowest level since 2002.
Concerns about economic growth have driven a flood of global money into the safety of bond markets. Pushing prices up, and yields sharply lower. Such drops suggest investors are lowering their expectations for economic growth and inflation.
On Friday, the trend continued with the yield on the 10-year Treasury note plunging to 1.54 percent shortly before noon.