Stocks

Dow Tumbles on Renewed Trade Concerns

The market was expecting a trade deal. It might not get one. And now stocks are tumbling.

The market was expecting a trade deal. It might not get one. And now stocks are tumbling.

The Dow Jones Industrial Average is tumbling after Donald Trump intimated that he’d be happy waiting until after the U.S. presidential election to reach a trade deal with China. And reports are emerging that the president might let new tariffs go into effect on Dec. 15.

The Dow has dropped 436.55 points, or 1.6%, to 27,346.49, while the S&P 500 has fallen 1.1% to 3079.70. The Nasdaq Composite is off 1.3% at 8460.30.

“The narrative on trade has quickly been turned upside down as negative headlines on tariffs have ignited a risk averse tone in the markets,” writes Charlie Ripley, senior investment strategist for Allianz Investment Management. “Where it once looked like a trade agreement between the U.S. and China was progressing, investors are seeing a different picture portrayed today.”

The bad news started yesterday, when Trump said he wants to place tariffs on Brazil and Argentine steel, and continued after the close when the U.S. Treasury Department said it would look into putting tariffs on more than $2 billion French goods in retaliation for a new “tech tax” in that country. Then, Trump told reporters at a Nato summit in London that he might “like the idea of waiting until after the election for the China deal.” And then reports emerged that Trump wants to go ahead with new tariffs on Dec. 15.

And with that, the rout was on.

Which begs the question: What is Trump trying to accomplish? NatAlliance’s Andrew Brenner has a theory. “Given Trump’s view of the Fed, he probably trying to put additional pressure on the Fed to ease December 11,” Brenner writes. “If he can get the stock market to ‘mini crash’ he may get the Fed doves to blink...We doubt it and we do not like the strategy.”

If that’s the strategy at all. Richard Farr of Merion Capital Group says there was never going to be a trade deal at all. “We doubt there was ever a true trade deal in the works,” he writes. “It’s all been a ruse or simply wishful thinking. The Administration simply made up rhetoric when the market began to realize back in October that a deal didn’t exist in the first place.”

Let’s hope not.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Stocks Videos