Stocks dropped on Thursday after US President Donald Trump said their next move after their lackluster meeting with Chinese trade diplomats is to put more pressure on China's imports as the two sides figure out what's going on.
In an announcement by the White House on Thursday, Trump said the US will slap a new 10% tariff on $300-billion worth of Chinse products, saying their Chinese counterparts did not stand to their word in economic negotiations.
News of the imposition of fresh tariffs, scheduled to take effect on September 1, has sent most of the blue-chip Dow Jones companies falling early Thursday. The new import tariff is also seen to heighten existing trade frictions between the two sides.
Equities collapsed on Wall Street in a 600-point wild swing while prices of oil in the world market crashed more than 8% -- the deepest drop in 4 years -- after Trump's latest announcement. Treasury output likewise took a heavy beating in the process.
Some finance experts said Trump's latest disclosure was a result of his glaring attempt to pressure the Federal Reserve to jack up interest rates next month. On Thursday, the US central bank sliced 25 basis-points off the Fed's benchmark funds rate when Trump asked for a 50-basis point cut.
Major share indexes in New York crumbled around 1% and the Dow Jones Industrial Average (DJIA) settled down 270 basis points. In the world market, prices of oil dipped around 9% following Trump's announcement on worries that the tariffs would affect demand. The US president's move comes just days after US trade diplomat Robert Lighthizer and Treasury Secretary Steve Mnuchin flew to China for a quick discussion about trade with China officials.
The S&P 500 also dropped 1.2 % while the NASDAQ Composite Index shed 1.3 & after soaring over 1.7%, capping the day's session 282 points lower. The DJIA had earlier gained as much as 312 points and the swift 600-point swing left Wall Street crawling.
In May, Trump increased tariffs to 10 percent from 25 % on China's products valued at $200 billion. The Chinese government quickly responded with their own trade sanctions. An economic deal, according to Chinese officials, will not materialize unless the existing policies and duties were removed, and the failure of the meeting in Shanghai this week shows China will stand by its word.