Stocks drop, wipe out gains for the year after new Trump tariff threat

Adam Shell, USA TODAY

Published 2:26 p.m. UTC Jun 19, 2018

The Dow erased its gains for year early Tuesday, sliding more than 350 points and extending a global stock sell-off triggered by President Trump's threat to levy billions of dollars more in tariffs on Chinese goods.

It's the latest escalation in a dispute that Wall Street fears could escalate into a full-blown trade war. Trump has directed the U.S. Trade Representative to prepare new tariffs on $200 billion in Chinese imports. 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.

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The Dow Jones industrial average was down more than 360 points, or 1.5%, at 24,614, shortly after 10 a.m. ET, according to Bloomberg data. That means the blue-chip index has fallen below the level where It finished out 2017 — 24,719.22

Uncertainty over how severe the U.S. dispute with China could get appears to be spurring investors to trim risk in their investments portfolios, Craig Erlam, a senior market analyst at Oanda, a trading firm in New York.

"The clear escalation that's occurred in recent days has shaken investors," Erlam told USA TODAY in an e-mail. "It's difficult to see how and when this ends. And it's difficult to fully grasp just how much damage will be done in the process."

Global stocks tanked overnight, with shares in China taking the biggest hit. The Shanghai composite fell 3.8 percent and the Shenzhen A Share index, which is similar to the technology-packed Nasdaq composite, plunged 5.8 percent. Shares were also down in Europe, with the STOXX Europe 600 Index, off 0.8 percent.

The Dow Jones has finished lower five straight trading days, is in danger of suffering its first six-day losing streak since March 2017.

More: Trump threatens to slap new tariffs on $200 billion in Chinese goods

More: Global stocks tumble after new Trump tariff threat

U.S. companies caught in the middle of the trade fight between the world's two biggest economies "are not immune" and could see their sales and earnings come under pressure if the situation worsens and commerce slows, Erlam said.

Trump said the new tariffs, which come days after his administration leveled $50 billion in duties on a wide array of Chinese goods, were a response to the retaliatory trade barriers the Chinese government imposed Friday. Trump said the latest round of tariffs — which he set at 10% — will go into effect if Beijing moves forward with its own import restrictions.

In overseas trading, Germany’s DAX was down 1.3 percent and France’s CAC 40 fell 1.3 percent. London’s FTSE 100 lost 0.5 percent.

Hong Kong’s Hang Seng lost 2.8 percent to 29,468.15. Tokyo’s Nikkei 225 retreated 1.8 percent and Seoul’s Kospi gave up 1.5 percent.

“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.”

Benchmark U.S. crude was down $1 to $64.85 per barrel in electronic trading on the New York Mercantile Exchange.

The dollar declined to 109.93 yen from Monday’s 110.54 yen. The euro edged down to $1.1560 from $1.1623 vs. the dollar.

Contributing: Associated Press; John Fritze, USA TODAY

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