U.S. stocks sank after China retaliated with higher tariffs on a range of American goods. Treasuries jumped with the yen on demand for haven assets.
The S&P 500 headed for the biggest decline since Jan. 3 and and the Dow Jones Industrial Average slumped more than 500 points after China targeted some of the nation’s biggest exporters. Caterpillar Inc. fell over 4% and Apple Inc. lost 5%. Soybeans plunged 2% and cotton prices sank 4%. The dollar erased gains and 10-year Treasury yields fell to the lowest level since late March. The yen also rose. Oil climbed as Saudi Arabia said two of its tankers were “sabotaged.”
Risk assets had been under pressure all morning after President Donald Trump
warned China not to retaliate after the latest round of American measures. The selling picked up when China said it will raise tariffs starting June 1. An unverified Twitter post purportedly by China’s Global Times suggested the possibility of selling some of Treasuries holdings. The escalation comes after talks ended last week in a stalemate, with no timeline for future discussions.
The Stoxx Europe 600 index was dragged into the red as almost every industry sector retreated, extending declines as the European Union said it was finalizing a list of U.S. goods to target in the event Trump imposes levies on car imports.
Investors are struggling to find positive catalysts for risk assets after the U.S. stepped up punitive tariffs on $200 billion in annual imports from China, and Trump started his Monday morning threatening that the trade standoff will “get worse” if there’s retaliation. While both economic superpowers have also worked hard since talks ended Friday to project calm and emphasize that they plan to continue negotiations, markets seem to sense fundamental divisions between the two sides.
On Monday, American officials are expected to announce details of their plans to boost tariffs on all remaining imports from China — some $300 billion in trade. Chinese state media blamed the U.S. for a lack of progress in trade talks while emphasizing the Asian nation’s economic resilience.
Elsewhere, Bitcoin climbed above $7,000 as the recent gains in cryptocurrencies extended over the weekend. Most base metals retreated as traders reassessed the demand outlook given the threats to global economic growth.