Major U.S. stock indexes plummeted as China retaliated against President Trump’s latest tariffs on its exports, duties that economists and businesses had long warned would take a bite out of consumer budgets.
The blue-chip Dow Jones industrial average sank 767 points, or 2.9% to 25,717, its largest drop since December,, at the close of New York trading on Monday. The broader S&P 500 dropped 3% and the tech-heavy Nasdaq sank 3.5%.
The Chinese yuan plummeted to its lowest level against the dollar in 11 years, a move that made the country’s products cheaper and prompted speculation that President Xi Jinping’s government was manipulating the currency. Bloomberg News reported separately that Xi had asked state-owned companies to stop purchases of U.S. crops after Trump imposed 10% duties on $300 billion of Chinese imports not covered under earlier tariffs.
The goods include a large swath of consumer items, hitting a sector of the U.S. economy that had been partially insulated by businesses seeking to retain customers. Driving up those costs will force some importers to stop buying and potentially drive others out of businesses, since they may well have to raise prices higher than shoppers are willing to pay.
“The tariffs will slow the economy,” said Seth Martin, an economist with the Swiss lender UBS. “Some of the hit will happen in the fourth quarter, but the bulk of it will happen in 2020.”
Barring a trade agreement with China that ends the duties and rejuvenates commerce between the world’s two largest economies, that means the impact of the tariffs may play a growing role in the presidential election, in which Trump has partly built his reelection pitch on economic growth.
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Dow Jones sinks 767 points in worst day of 2019 as China trade war heats up https://t.co/ycghWLGoc1
— Washington Examiner (@dcexaminer) August 5, 2019
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