US stocks set to plunge as traders fret about China's response to Trump's trade war
US stocks plummeted Monday, tracking a drop in Asian and European markets. Stocks dropped after China said it would raise tariffs on some US goods beginning June 1. The trade spat is escalating after the US on Friday increased duties on some Chinese goods and threatened further action.
US stocks tumbled on Monday after China announced plans to retaliate against the duty increases that the US imposed last week on Chinese goods, heightening fears of a prolonged trade war between the two nations.
Heavy selling pushed all three of the major US averages down by at least 2.3%, with the Nasdaq Composite trading lower by 3.4% to pace the decline. The Dow Jones Industrial Average fell by more than 700 points at its low.
Uber's stock, which slumped about 8% during the ride-hailing group's first day of trading on Friday , dropped another 10.66% .
Shares in technology companies which import components from China and export finished products to the Asian nation — including Apple, Seagate, and Western Digital — slid by at least 5.8%.
Meanwhile, companies such as Caterpillar, John Deere, Best Buy, and Mattel also saw their stocks decline by at least 4.55%, as investors anticipated higher import and export costs would temper demand and eat into profits.
China's Finance Ministry said on Monday that on June 1 it would raise duties on about 5,000 US products — valued at about $60 billion — to levels as high as 25%.
"US equity markets are taking a battering as China has responded in kind to US tariffs," said Neil Wilson, chief market analyst for Markets.com. "Make no mistake this is a serious escalation and we have a trade war on our hands again."
"A lengthy standoff will start taking a fresh toll on the domestic and global economies," said Konstantinos Anthis, the head of research at ADSS.
President Donald Trump last week accused China of walking back on provisions in a draft trade agreement, saying the country " broke the deal ." Following unproductive talks in Washington, the Trump administration on Friday hiked the tariff rate on $200 billion worth of Chinese goods to 25% from 10%. The US is preparing to apply new tariffs to a further $325 billion worth of Chinese products if a deal isn't struck in the next three to four weeks, according to Bloomberg .
Analysts generally predict that US consumers will stomach the tariffs in the form of higher prices on clothes, electronics, toys, furniture, and other goods.
The prospect of an enduring trade war is taking a toll on equity markets.