Trump sends Dow Jones plunging nearly 800 points by tweeting 'I am a tariffs man' raising fears
U.S. stock markets plummeted Tuesday as a series of tweets from President Donald Trump suggested a trade war with China could resume next year despite claims of a truce and work on a long-term deal between the two countries.
The Dow Jones closed almost 800 points down at 25,027, a loss of 3. 1 per cent of its value, while billions were also wiped off the value of the Nasdaq and the S&P 500, the other two key indices.
The S&P 500 lost 90 points, or 3.2 percent, to 2,700. The Nasdaq fell 283 points, or 3.8 percent, to 7,158.
Trump said in morning tweets that he and Xi would 'probably' have a deal at the end of a 90-day timetable for talks that began on Saturday as he declared himself against free trade.
The declaration sent shockwaves through stock markets already nervous of a downturn and buffeted by fears of a tech slowdown which has seen Apple and other Silicon Valley firms lose billions off their value.
'Unless extended, they will end 90 days from the date of our wonderful and very warm dinner with President Xi in Argentina,' Trump asserted. 'China is supposed to start buying Agricultural product and more immediately.
President Xi and I want this deal to happen, and it probably will.'. He then proclaimed himself to be a 'tariffs man' in direct contradiction to his own White House's assertions that Trump is a free-trader.
'We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN,' Trump said in messages. 'Let the negotiations begin. MAKE AMERICA GREAT AGAIN!'.
Trump's tweets sent the market plunging. The Dow fell throughout the morning and was down by more than 700 points by early afternoon, then failed to regain any value. A further fall in value could see the year's gain lost entirely.
Among the firms hit were Boeing and Caterpillar, two major exporters which would have much to lose of trade tensions don't ease.
Bond prices soared sharply, sending yields lower, as traders shoved money into lower-risk investments. The sharp drop in yields hurt banks because it makes it harder to earn money from lending. JPMorgan Chase sank 4.5 percent.
Investors had initially welcomed the truce that the administration said was reached over the weekend in Buenos Aires between Presidents Trump and Xi Jinping. The prospect of a deal sent stocks soaring Monday.
But on Tuesday, after a series of confusing and conflicting words from Trump and senior White House officials, stocks tumbled, with the Dow Jones sinking as much as 800 points.
White House aides have struggled to explain the details of what the two countries actually agreed on. And China has not confirmed that it made most of the concessions that the Trump administration has claimed.
Trump's top trade adviser said Tuesday evening that 'hand-wringing' in the media wasn't necessary even as he admitted that the administration had sowed confusion.
'Maybe that's the fault of us not communicating,' Peter Navarro told Fox News in an appearance on Special Report. 'Maybe that's why I'm here.'.
Among the conflicting assertions that White House officials made was over whether China had actually agreed to drop its 40% tariffs on U.S. autos.
In addition, Treasury Secretary Steven Mnuchin said Tuesday on the Fox Business Network that China agreed to buy $1.2 trillion of U.S. products.
But he added, 'if that's real' - raising some doubt - it would close the U.S. trade deficit with China, and 'we have to have a negotiated agreement and have this on paper.'.
Many economists have expressed skepticism that very much could be achieved to bridge the vast disagreements between the two countries in just 90 days.
'The actual amount of concrete progress made at this meeting appears to have been quite limited,' Alec Phillips and other economists at Goldman Sachs wrote in a research note.
'The sense is that there's less and less agreement between the two sides about what actually took place,' said Willie Delwiche, investment strategist at Baird.
'There was a rally in the expectation that something had happened. The problem is that something turned out to be nothing.'.
Other concerns contributed to the stock sell-off, including falling long-term bonds. That suggested that investors expect the U.S. economy to slow, along with global growth, and possibly fall into recession in the coming year or two.
Trump and White House aides promoted the weekend deal as an historic breakthrough that would ease trade tensions and potentially reduce tariffs.
The president's top economic adviser indicated on Monday that the trade truce with China would be called off if an accord doesn't begin to 'firm up' in the next three months as he insisted that Trump would prefer a deal to tariffs.
'At the end of 90 days, they have to show significant progress,' Larry Kudlow told reporters. 'He wants a world with zero tariffs, zero non-tariff barriers and zero subsidies. That's his goal,' the president's National Economic Council director said.
But Kudlow was left with egg on his face as his boss, Trump, slapped down the claim he wanted zero tariffs in a tweet saying: 'Remember I am a tariff man.
The 90-day timetable started Saturday and will stave off a round of tariffs on Beijing that were scheduled to go into effect on Jan. 1, the White House said on Monday.
That was after Kudlow mistakenly claimed Trump would hold off on further action until April. It's by March 1 that the White House has set as the deadline for the Chinese to act.
A statement from after a dinner between Trump and Xi announced a halt in the trade war for three months, with the White House stressing on Monday that it wants to see immediate action.
Kudlow did not outline the consequences of inaction but said, 'They've gotta move quickly on all fronts. 'This is not going to be something where there is soft commitments that get kicked down the road,' Mnuchin said the same day.
Talks with China have fallen apart at other junctures, including a round of talks led by Mnuchin earlier this year.
Trump imposed $200 billion in tariffs on China as a result that he pledged to raise to $500 billion at the beginning of next year unless there's a deal.
Negotiations on the U.S. side are being led by Robert Lighthizer, the president's trade representative, Kudlow said, offering a conflicting account from Mnunchin, who'd claimed earlier in the day that Trump is in charge of talks.
'Nothing will happen without President Trump,' Kudlow explained as he spoke to reporters on the White House's front lawn.
The White House says it is cautiously optimistic after a dinner between Presidents Trump and Xi over the weekend that a deal would come out of the new push.
'The story's always been disappointing,' Kudlow admitted during a press call. 'I'm just saying the history's not been great.'. However, he said, 'I hope it has a happy ending, truly. And we have a lot of things to do.'.
Kudlow assessed during the White House call on Monday afternoon, 'We never ever got close to this. President Trump also said Monday that U. -China relations 'have taken a BIG leap forward' after he and President Xi agreed on the trade truce.
Trump used the name of a Communist Party of China farm reform program that killed tens of millions of people 60 years ago.
The Great Leap Forward was a cornerstone of Chairman Mao Zedong's move toward a socialist economy by requiring farmers to 'collectivize' their property and operations, and by forcing farm workers to take industrial jobs.
Upsetting centuries of agrarian tradition and moving farmers to factory work led to a famine that killed tens of millions of Chinese.
Government officials tried to reverse the trend by instituting farm production quotas, executing some who failed to meet minimum targets. China's economy was devastated.
Trump appeared to be unaware of the significance of his words on Monday, tweeting: 'My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen.'.
'We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!' he wrote.
Minutes later, the president specifically tied his self-congratulation to what he predicted will be a dramatic increase in farm exports from the U.S.
'Farmers will be a a very BIG and FAST beneficiary of our deal with China. They intend to start purchasing agricultural product immediately.
We make the finest and cleanest product in the World, and that is what China wants. Farmers, I LOVE YOU!' he tweeted.
Historians' estimates of the number of Chinese killed by the famine that resulted from the Great leap Forward range from 18 million to 55 million.
Buyers and analysts quickly pointed out on Monday that China's tariffs on U.S. farm produce are still in place, mostly 25 per cent duties on soybeans, corn, sorghum and wheat.
The so-called deal appeared on Monday to be little more than a cease-fire in what had become a protracted tariff war, with Trump and Xi agreeing pull back from an all-out trade war that was threatening world economic growth and had set global investors on edge.
This year Trump imposed an import tax of 25 percent on $50 billion in Chinese products, then hit an additional $200 billion worth of goods with 10 percent tariffs.
Those 10 percent tariffs were scheduled to ratchet up to 25 percent on Jan. 1 if the U.S. and China failed to reach an agreement to at least postpone that move.
In Buenos Aires, Trump agreed to delay the scheduled U.S. tariff increase for 90 days while the two sides negotiate over the administration's complaints related to how Beijing systematically steals trade secrets and forces the U.S.
and other foreign countries to hand over sensitive technology as the price of admission to the vast Chinese market.
In return, China agreed to buy what the White House called a 'not yet agreed upon, but very substantial' amount of U.S. products to help narrow America's gaping trade deficit with China.
If the Chinese did eventually increase such purchases, it would be warmly welcomed in the U.S. Farm Belt, where producers of soybeans and other crops have been hurt by Beijing's retaliatory tariffs.
Trump tweeted late Sunday that 'China has agreed to reduce and remove tariffs on cars coming into China from the U.S.
Currently the tariff is 40%.' There was no Chinese announcement about possible tariff cuts, and the Ministry of Commerce in Beijing didn't immediately respond to questions.
Beijing cut import duties on foreign autos to 15 percent in July but added a 25 percent penalty for U. -made vehicles the following month in response to Trump's tariff hikes.
Kudlow says that Xi indicated that 'large numbers of transactions' of agricultural, energy and industrial commodities would be accompanied by tariff reductions soon. He put a ballpark estimate at $1. 2 billion, although he noted they are private sector transactions.
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