Wild ride on Wall Street after Donald Trump's China trade threats

Wall Street initially tumbled following US President Donald Trump’s shock Twitter threat to re-start his trade war with China, but largely rallied by the close of trading before being dealt a blow after the closing bell to cap a tumultuous day for markets.

The Dow Jones Industrial Average plunged by 450 points at its opening on Monday while the S&P500 and Nasdaq also experienced substantial drops before recovering most of their losses by the close of the session, reflecting continued confidence that the US and China will eventually strike a trade deal.

However, stock futures dropped sharply following the market close after US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said China had moved away from commitments made over the course of trade negotiations.

US negotiators are now recommending an increase in tariffs on Chinese goods if a trade agreement is not reached by Friday.

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The VIX, which measures stock market volatility, jumped to its highest level since January.

RICHARD DREW/AP

Wall Street initially tumbled following US President Donald Trump’s shock tariff threat against China.

US companies with significant exposure to the Chinese market – including tech firms, clothing companies and heavy-machinery manufacturers – recorded the biggest drops in their share prices.

Stocks for Nike, Apple, heavy-machinery makers Caterpillar and Deere and car makers Ford and General Motors fell.

By the close of trading at 4pm local time, the US markets had substantially recovered. The Dow Jones fell by 0.25 per cent from Friday, the Nasdaq by 0.5 per cent and the S&P 500 slipped by 0.45 per cent.

The Dow still remained up

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