Stocks fell sharply Monday after China decided to raise tariffs on some U.S. goods as the ongoing trade war between the world’s largest economies intensifies.
The Dow was down more than 550 points, while a drop in the tech sector pushed the S&P 500 down by 2.2%. The Nasdaq sank 2.9%.
China will hike tariffs on $60 billion worth of U.S. imports, starting on June 1. The goods targeted include a broad range of agricultural products. This comes after President Donald Trump raised tariffs on Chinese imports last week. China said in a statement that the U.S.′ decision jeopardized the interests of both countries and does not meet the “general expectations of the international community,” according to a Google translation.
Trade bellwether Caterpillar fell more than 3.5% while Apple dropped 4.4%. Boeing shares also declined more than 3% amid speculation the airplane maker could be singled out by China in the trade war.
Asian markets fell broadly. The Nikkei 225 index declined 0.7% Monday while the Shanghai Composite pulled back 1.2%. European stocks also dropped. The Stoxx 600 index fell 1.1% while the German Dax dipped 1.5%.
“Volatility is going to persist. People don’t know what to make of it,” said JJ Kinahan, chief market strategist at TD Ameritrade. But “this is more of a re-evaluation of stocks than it is a pure panic. Bonds have rallied over the last couple of weeks, but if this was a panic you’d see people coming a lot more for bonds.”
The benchmark 10-year Treasury yield fell to 2.41% on Monday while the 2-year rate dipped to 2.19%. The Cboe Volatility index, which is considered to be the best fear gauge in the stock market, rose 3.6 points to 19.63.
Trump tweeted on Monday that China will be “hurt very badly if you don’t make a trade deal, ” noting that companies would be forced to leave the country without an agreement. Trump also said that China had a “great deal” almost completed but they “backed out.”