Stocks tumble right after Trump threatens to hike tariffs on $200B of Chinese imports

The president's comments, delivered on Twitter, came as a Chinese delegation was scheduled to resume talks in Washington. This prospect of higher tariffs and heightened tensions certainly alarmed investors when the markets opened on Monday.


                            Stocks tumble right after Trump threatens to hike tariffs on $200B of Chinese imports

President Donald Trump turned up the pressure on China on Sunday, threatening to hike tariffs on $200 billion worth of Chinese goods.

Trump's comments, delivered on Twitter, came as a Chinese delegation was scheduled to resume talks in Washington on Wednesday aimed at resolving a trade war that has shaken financial markets and cast gloom over the world economy. Trump turned up the heat by saying he would raise import taxes on $200 billion in Chinese products to 25% from 10% on Friday. The effects of his threat were immediately visible when stocks and commodities in the Asian markets began to tumble.

In this July, 5, 2018, file photo, a jockey truck passes a stack of 40-foot China Shipping containers at the Port of Savannah in Savannah, Ga. President Donald Trump turned up the pressure on China Sunday, May 5, 2019, threatening to hike tariffs on $200 billion worth of Chinese goods. (Source: AP Photo/Stephen B. Morton, File)

He'd twice pushed back deadlines — in January and March — to raise the tariffs in a bid to buy more time for a negotiated settlement. But on Sunday, Trump, who has called himself a "tariff man," said he's losing patience. "The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!" Trump tweeted. 

The prospect of higher tariffs and heightened tensions has certainly alarmed investors when markets opened on Monday. "When the president puts his foot down, it makes the market go down." Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in a research note Sunday. "Tariff man is back just in time to make the stock market dive, dive, dive."

In his tweets, Trump also threatened to slap tariffs on another $325 billion in Chinese imports, covering everything China ships annually to the United States.  Following the tweet, the markets went into a frenzy. Stock markets fell on the news. The future for the Dow Jones Industrial Average lost 1.9%. The Shanghai Composite index plunged 5.3% while the Hang Seng in Hong Kong sank 3.6%. Japan's markets were closed for a holiday.

The two countries are locked in a high-stakes dispute over China's push to establish itself as a technological superpower. The US has charged China with resorting cybertheft and forcing foreign companies to hand over technology — in a drive to establish Chinese companies as world leaders in advanced industries such as robotics and electric vehicles.

The administration has repeatedly suggested that the negotiators are making progress. A month ago, Trump said that the two countries were "rounding the turn" and predicted that "something monumental" would be achieved in the next few weeks.

In this Jan. 31, 2019, file photo President Donald Trump, left, meets with Chinese Vice Premier Liu He, far right, at the White House in Washington. Trump turned up the pressure on China Sunday, May 5, threatening to hike tariffs on $200 billion worth of Chinese goods. (Source: AP Photo/Susan Walsh, File)

But last week, Treasury Secretary Steven Mnuchin seemed to temper expectations, suggesting that Washington was willing to "move on" if it can't get the deal it wants.  A substantive deal would require China to rethink the way it pursues its economic ambitions, abandoning or scaling back subsidies to its companies and giving them more access to the Chinese market.

Trump has made it a priority of shaking up American trade policy. He remarked that previous administrations, gullible and weak, had let China get away with abusive trade practices, accepting empty promises from Beijing and allowing the US-China economic relationship to grow ever more lopsided. As evidence, he pointed to America's vast US trade deficit with China — $379 billion last year, by far the biggest with any country in the world. 

Once he took office, Trump's relationship with his Chinese counterpart, Xi Jinping, seemed to get off to a good start. The two men shared chocolate cake and amiable conversation at Trump's resort in Mar-a-Lago, Florida, in April 2017. A few weeks later, China agreed to open its market to US beef, cooked chicken, and natural gas in what Commerce Secretary Wilbur Ross called a "herculean accomplishment."

The romance faded. In March 2018, the Office of the U.S. Trade Representative issued a report accusing China of using predatory tactics to strengthen its tech companies.  Last July, the Trump administration gradually began slapping import taxes on Chinese goods to pressure Beijing into changing its policies. The Chinese have retaliated by targeting $110 billion in US imports.

The fight between the world's two biggest economies is raising worries about global economic growth. The International Monetary Fund, the World Bank, and others have downgraded their forecasts for the world economy, saying the US-China standoff is reducing world trade and creating uncertainty for companies trying to decide where to buy supplies, build factories, and make investments.

Trump has portrayed his tariffs as a moneymaker for the United States and a benefit to the US economy.  The overall US economy has remained healthy. On Friday, the government reported that the US unemployment rate had fallen to the lowest level in half a century.

By PAUL WISEMAN and JOSEPH PISANI AP Business Writers