Trade war fears wipe out stock gains for year
The Dow erased its gains for the year Tuesday, finishing 287 points lower and extending a global stock sell-off triggered by President Donald Trump’s threat to levy billions of dollars more in tariffs on Chinese goods.
It’s the latest escalation in a dispute that Wall Street fears could develop into a full-blown trade war. Trump has directed the U.S. Trade Representative to prepare new tariffs on $200 billion in Chinese imports. The president accused Beijing of being unwilling to resolve the dispute over complaints it steals or pressures foreign companies to hand over technology. China’s Commerce Ministry criticized the White House action as blackmail and said Beijing was ready to retaliate.
The Dow Jones industrial average, after falling nearly 420 points at its low, closed down 287.26 points, or 1.2 percent, at 24,700, according to Bloomberg data. That means the blue-chip index has slipped below the level where it finished 2017 – 24,719.22. Roughly half of the Dow’s losses are due to two stocks, Boeing, which fell $13.61 a share, or 3.8 percent, and Caterpillar, which declined $5.39, or 3.6 percent.
Lloyd Blankfein, CEO of investment bank Goldman Sachs, was asked at an event in New York whether the tensions with China qualified as a trade war, game of chicken or a sideshow.
“I will let you know,” he told the audience at The Economic Club of New York. “The problem is how many times can you be on the edge of your seat and waiting for a shoe to drop.”
Still, like other Wall Street pros have said, Blankfein viewed the Trump administration’s tactics as “part of a nego- tiating pattern” but didn’t think the U.S. had entered “a suicide pact” or that it would cause the “economy to collapse.”
Uncertainty over how severe the U.S. dispute with China could get appears to be spurring investors to trim risk in their investments portfolios, says Craig Erlam, a senior market analyst at Oanda, a trading firm in New York.
“The clear escalation that’s occurred in recent days has shaken investors,” he told USA TODAY. “It’s difficult to see how and when this ends. And it’s difficult to fully grasp just how much damage will be done in the process.”
Global stocks tanked overnight, with shares in China taking the biggest hit. The Shanghai composite fell 3.8 percent and the Shenzhen A Share index, which is similar to the technology-packed Nasdaq composite, plunged 5.8 percent.
By ending the day lower, the Dow suffered its first six-session losing streak since March 2017.