New tariff on goods from China short- circuits rally
1.5%, to 1,550.76.
The escalation in the longrunning and costly trade dispute comes only a couple of days after both sides resumed negotiations. In a series of tweets, Mr. Trump noted that while the slowmoving trade talks have been “constructive,” China has not followed through on some prior agreements.
The new tariff would take effect Sept. 1. The U. S. has already applied tariffs of 25% on $ 250 billion worth of goods from China. Beijing has retaliated with tariffs on $ 110 billion in American goods, including agricultural products, in a direct shot at Trump supporters in the U. S. farm belt.
Unlike the earlier set of tariffs, which were meant to minimize the impact on ordinary Americans by targeting industrial goods, the new ones would affect a wide range of consumer products.
The tariff announcement came a day after Mr. Trump expressed frustration that the Federal Reserve isn’t cutting interest rates more aggressively.
The Fed cut its key interest rate for the first time in a decade Wednesday, citing uncertainty over the U. S. trade conflicts as a factor in the decision to lower rates in an otherwise healthy economy. However, Fed Chairman Jerome Powell suggested the central bank was not embarking on an extended cycle of cutting rates, as many investors had hoped.
Banks, industrials and consumer discretionary were among the hardest- hit sectors. Bank of America dropped 3.9%, Boeing slid 2% and Gap tumbled 7.9%.
Energy stocks also fell sharply as crude oil prices sank. Exxon Mobil fell 2.6%.
Utilities and real estate stocks rose as traders shifted money into more stable, high- yield stocks.
Prices for U. S. government bonds rose sharply, sending yields lower. The yield on the 10- year Treasury fell to 1.90%, the lowest level since the 2016 election. That yield, a benchmark used to set interest rates on mortgages and other loans, has been declining steadily since November, when it traded as high as 3.23%.
Meanwhile, the yield on the 2- year Treasury note slid to 1.73% from 1.87% late Wednesday, a very large move.
The latest jump in bond prices is signaling that investors still feel there is a risk of an economic downturn, said Michelle Girard, chief U. S. economist at NatWest Markets.
“The feeling remains that this is not going to be oneanddone and the Fed is still going to have to lower rates again this year,” Ms. Girard said.
The price of U. S. crude oil skidded 7.9%, the largest drop since February 2015. It fell $ 4.63 to settle at $ 53.95 a barrel. Brent crude oil, the international standard, sank $ 4.55 to close at $ 60.50 a barrel.
Gold fell $ 5.20 to $ 1,420.90 per ounce, silver fell 23 cents to $ 16.12 per ounce and copper was unchanged at $ 2.66 per pound.