Stocks plunge on Trump's China trade threat

President Trump’s surprising decision to renew his expanded tariff threats is raising anxiety among investors. The Dow fell more than 350 points, about 1.3 percent, shortly after the start of trade Monday. While the threats could be just another negotiating ploy, they also suggest talks are getting stuck.

Stocks tumbled Monday after President Donald Trump threatened to raise tariffs on $200 billion worth of Chinese goods. The development comes amid ongoing trade talks between the U.S. and China. Goldman Sachs noted that Mr. Trump’s action suggests the U.S. has reached a “sticking point” in negotiations. 

The Dow fell more than 350 points, or 1.3 percent, in the first 10 minutes of trading Monday. Other indices also dropped, including the S&P 500 and the tech-heavy Nasdaq composite, where companies like Apple, Qualcomm and Broadcom, which  rely heavily on Chinese business, took especially big hits, falling more than 3 percent each in early trading. According to data provider FactSet, 64.7 percent of Qualcomm’s revenue comes from China. Broadcom’s Chinese revenue is 48 percent of its total and Apple gets nearly one-fifth of its revenue from world’s second largest economy.  

Mr. Trump on Sunday signaled his discontent with what he described as slow progress on trade negotiations with China, writing on Twitter that he planned to boost tariffs on Friday from 10 percent to 25 percent on the Chinese imports. He also said he would impose tariffs on $325 billion worth of products from China, accounting for all of its exports.

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While the threat is likely a negotiating ploy — Mr. Trump may be “emboldened by the strength of the U.S. economy, and firm U.S. equities” — it startled investors because of earlier reports of progress between the two sides, said TD Securities analyst Mitul Kotecha in an analyst note. 

“We had thought that a trade deal between the US and China was close to being agreed and markets had become rather sanguine about the issues,” Kotecha wrote. “Indeed headlines over recent weeks had been encouraging, with both sides sounding conciliatory, and progress noted even on structural issues.”

“We lose 500 billion dollars”

Mr. Trump, who has called himself “tariff man,” complained on Twitter on Monday morning that the U.S. loses “500 Billion Dollars” a year in trade with China. “Sorry, we’re not going to be doing that anymore!” he tweeted.

The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!

— Donald J. Trump (@realDonaldTrump) May 6, 2019

Chinese envoys said they’re still preparing to travel to the U.S. for trade talks, a government spokesman said Monday, suggesting negotiations on ending a bruising tariff war will go ahead despite the president’s surprise threat to raise import taxes. Beijing is “trying to get more information” following Mr. Trump’s announcement he might impose 25 percent tariffs

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