NEW YORK (AP) – Stocks fell sharply on Wall Street on Friday (Aug 23) after President Donald Trump called on US companies to consider alternatives to doing business in China. He also said he would respond to Beijing’s latest tariff increase.
The Dow Jones Industrial Average sank more than 400 points after the president made the announcements on Twitter.
Trump also said he was “ordering” UPS, Federal Express and Amazon to block any deliveries from China of the powerful opiod drug fentanyl. The stocks of all three companies fell as traders tried to understand what the implications for them were.
The US has said it would impose 10 per cent duties on the US$300 billion (S$400 billion) of Chinese goods that were not already subject to tariffs. Early Friday China said it would retaliate with taxes on US$75 billion of US products.
The market opened lower with the news of the new tariffs. It recovered some of its losses after a widely anticipated speech by Federal Reserve chairman Jerome Powell gave no clear signal on when the central bank may cut interest rates again.
Speaking at a Fed policy conference in Jackson Hole, Wyoming, Powell noted that there’s growing evidence of a global economic slowdown and suggested that uncertainty over Trump’s trade wars have complicated the central bank’s ability to set interest rate policy.
Powell said the Fed “will act as appropriate to sustain the expansion.”
Markets have been jumpy for weeks as traders increasingly worry about a protracted trade war and whether it could tip the already fragile global economy into recession.
“There’s been reason to be concerned that this might not get resolved anytime soon, but the market is accepting that not only is it not likely, it’s very unlikely,” said Randy Frederick, vice-president of trading and derivatives at Charles Schwab.
The S&P 500 was down 1.6 per cent as of 12.30pm Eastern Time.
The Dow Jones Industrial Average lost 417 points, or 1.6 per cent, to 25,834. The Nasdaq dropped 2 per cent.
Technology companies, which have much to lose in the trade battle, accounted for the biggest share of the market’s losses. Chipmaker Nvidia slid 4.8 per cent and Apple lost 4 per cent. Companies that rely on consumer spending also took losses. Retailer L Brands dropped 6.8 per cent.
Energy stocks headed lower along with crude oil prices. The price of crude sank 3 per cent to US$53.63 a barrel as traders worried that the latest escalation in the trade battle could sap global demand for energy.
US bond prices rose sharply as investors sought safety, sending yields lower. The yield on the 10-year Treasury fell to 1.54 per cent from 1.61 per cent, a large move.
The price of gold, another safe haven for investors during times of market turbulence and economic weakness, rose 1.7 per cent to US$1,534 an ounce.
The Trump administration has imposed a 25 per cent tariff on US$250 billion in Chinese imports. The pending 10 per cent tariff on another US$300 billion in goods would hit everything from toys to clothing and shoes that China ships to the United States, however some 60 per cent of the new tariffs wouldn’t go into effect until mid-December, and others were taken off the table altogether.
China gave no details of what goods would be affected in its latest round of tariffs, but the timing matches Trump’s planned duty hikes.
China’s government appealed to Trump this week to compromise in order to break a deadlock in negotiations.