US stocks take huge fall over trade war fears

STOCK markets slumped in America last night amid fears of an economic slowdown and a renewed trade war.

The Dow Jones shed as much as 801 points in afternoon trading, dropping around more than 3pc in New York in a selling frenzy.

The benchmark index closed down 3.1pc at 25,027.07.

President Trump warned a proposed deal to slash trade barriers with China could fall apart - forcing him to add further tariffs to the £192bn he has already imposed on Beijing. He has held talks with Chinese premier Xi Jinping on how to level the playing field after claiming Beijing exploits international rules.

In a tweet, Trump said: ‘President Xi and I want this deal to happen, and it probably will.

‘But if not remember, I am a tariff man. When people or countries come in to raid the great wealth of our nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power.

‘We are right now taking in billions of dollars in tariffs. Make America rich again.’

Investors are strongly opposed to higher tariffs because it is feared that any hit to trade will damage the economy badly.

It sent big industrial stocks and car firms down heavily as new barriers would hurt their profits.

Chevrolet and Cadillac maker General Motors was off as much as 4.5pc and Ford was down by 4.1pc at one point.

Manufacturing titan General Electric fell as far as 5.8pc.

Investors in US government debt are also betting heavily that an economic slowdown will mean the US Federal Reserve will not be able to raise interest rates next year as it plans to. At present, signals in the bond market even suggest there could be a recession.

Jeff Gundlach, the chief executive of investment firm Double Line Capital, who is known in Wall Street as the ‘Bond King’, said the debt markets suggest the economy will get weaker.

These jitters hit bank stocks, with Goldman Sachs down as much as 3.6pc and JP Morgan off 4.5pc.