Dow plunges 700 points as Trump initiates trade war with China

Virginia Carson
March 26, 2018

Wall Street on Friday struggled to shake off fears of a global trade war after the United States moved to slap tariffs on China and as technology stocks took another hit with Micron's results weighing on chipmakers, though oil prices gave some succor. Under a memorandum signed at the White House, Trump ordered the US trade representative to develop a list of specific tariffs within 15 days; that list would be subject to a period of public comment before they take effect.

The broad-based S&P 500 dropped 55.43 points (2.10 per cent) to end the week at 2,588.26, while the tech-rich Nasdaq Composite Index fell 174.01 points (2.43 per cent) to 6,992.66. Industrials and materials were also among the worst-performing sectors in the S&P. That helped push bank stocks sharply lower too.

The Dow is down almost 5 percent in 2018. The Nasdaq composite pulled back 2.3 percent. It was Wall Street's worst week in more than two years.

Mr Trump signed a presidential memorandum that will target the Chinese imports but only after a consultation period. "The combination of fiscal stimulus and corporate profits will overwhelm tariffs". They had climbed earlier this week after the Federal Reserve raised interest rates, but then tumbled after the tariffs were proposed.

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"If the Trump administration really wanted to hurt China and start a trade war, then they would go after those larger sectors", he said.

The Dow Jones industrial average fell 92 points, or 0.4 percent, to 23,858. Trump's announcement was "typical unilateralism and protectionism", China's Commerce Ministry said in a statement, and it had set a "very bad precedent". The German DAX was down 1.77 percent and the British FTSE 100 droped.44 percent.

"Global equity market sentiment remains downbeat as US tariffs aimed at China have flared tensions between the two nations and prodded concerns of a broader escalation", said Carl Campus, economist at BMO Capital Markets in a note.

The biggest losers on the Dow on Thursday included stocks with significant exposure to China: Caterpillar, 3M and Boeing. China is a big importer of American-produced food, especially staples such as soybeans.

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The large falls for the Dow came after President Donald Trump unveiled a plan on Thursday to impose up to $60bn in new tariffs on Chinese goods, as well as limiting the country's investment in the United States as payback for what his administration alleges is years of intellectual property theft.

The losses marked the biggest daily percentage drop for each of the major indexes since February 8, when the Dow and S&P confirmed a market correction from their Jan 26 highs. A 10 percent decline from its high earlier this year is considered a correction. Other notable decliners Thursday included Accenture Plc and Micron Technology Inc., which reports fiscal second-quarter earnings after the close of trading.

At the closing bell at the New York Stock Exchange, the Dow finished the day down 724 points to 23,957. The Nasdaq is still 3 percent in the black despite taking a beating this week.

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