NEW YORK (NBC News) — Stocks sank on Monday, with the Dow Jones Industrial Average falling by more than 700 points at its session low in response to a ratcheting up of trade tensions after China said it would raise tariffs on $60 billion worth of U.S. goods, starting June 1.
By early afternoon, the Dow had lost 2.7 percent, putting the index on track for its biggest one-day loss since January. The S&P 500 dropped by 2.6 percent and the Nasdaq Composite fell 3.5 percent, their worst performance so far this year.
Dow stalwarts Boeing and Caterpillar, whose core businesses have large exposure to China, were down 4.5 percent and 5.3 percent, respectively. The tech sector took the heaviest blow overall, with Apple, United Technologies and Cisco all down around 5 percent.
Global markets have shown intense volatility over the past few weeks, with all three major indices in the U.S. seeing an extended sell-off as investors parsed the likelihood of a resolution to months of trade negotiations between the world’s two largest economies.
“We’ve never taken in 10 cents [from China] until I was elected,” President Donald Trump told reporters at the White House on Monday when asked about the ongoing trade war. “We’re taking in billions of dollars in tariffs. I love the position that we are in, we’ve gone up a lot since our great election.”
While Trump has repeatedly asserted that China pays the tariffs, White House economic adviser Larry Kudlow acknowledged this weekend that U.S. consumers end up paying for the administration’s tariffs on Chinese goods, telling “Fox News Sunday” in an interview that “Both sides will suffer on this.”
Trump said Monday he was not worried about additional retaliation from China for the tariffs the U.S. had imposed on a total of $250 billion in Chinese imports, saying “It’s working out very well.” He also said he was hopeful for a “very fruitful” meeting with China’s President Xi Jinping at the G-20 meeting in Osaka in June.
The retaliation from the Chinese finance ministry comes after Trump followed through on his threat to raise tariffs on $200 billion of Chinese imports last week. As of 12:01 a.m. last Friday, around 5,700 categories of Chinese-made goods bound for the U.S. were subject to a 25 percent tariff, up from 10 percent.
After the two sides failed to reach a deal during high-level trade talks in Washington last week, Trump challenged Beijing, tweeting this weekend that “I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!”
He also warned the Chinese that “the deal will become far worse for them if it has to be negotiated in my second term. Would be wise for them to act now, but love collecting BIG TARIFFS!”
China has already raised duties on $110 billion of American imports in retaliation for earlier tariff hikes by the Trump administration.
Due to the lopsided trade balance — China imports only $130 billion in American goods, compared to the $500 billion in Chinese goods that the U.S. imports — regulators have targeted operations of American companies in Chinaby slowing customs clearance for their goods and stepping up regulatory scrutiny that can hamper operations.
The decline in trade relations has left businesses, investors and policymakers across the world concerned about the negative impacts on an already slowing global economy.