Dow Jones Reverses Lower As Trump Tariffs Threatened On All Chinese Imports

President Donald Trump just upped the ante for his big meeting next month with Chinese President Xi Jinping. Wall Street has eyed the meeting as the last chance to avoid a big escalation of the China trade war, with Trump tariffs on $200 billion in Chinese imports set to jump from 10% to 25% on Jan. 1.

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Yet the stakes just got a lot bigger. Trump is reportedly sending a message that the late November meeting with Xi during the G-20 summit in Buenos Aires better produce results. If not, Trump will proceed to order tariffs on the remaining roughly $267 billion in Chinese imports that have yet to be targeted, with an announcement coming in December.

Separately, the Trump administration added Chinese chipmaker Fujian Jinhua Integrated Circuit Co. to its export restriction list for national security reasons.

The news helped undercut a stock market rally that had already lost steam on Monday and sent the Dow Jones industrial average, S&P 500 and Nasdaq composite reversing sharply lower. The Dow and S&P 500 fell more than 1%, while the Nasdaq tumbled 2.3%. And that’s off the worst levels of the afternoon.

Shares of Apple (AAPL) retreated 2.9%, though that was tame compared to many names. That last big tranche of imports presumably includes the Apple iPhone. While Trump exempted the Apple Watch and Air Pods from tariffs, it remains to be seen whether he will give a reprieve to the iPhone if the China trade war escalates.

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Apple stock is the biggest weight in the Dow Jones, S&P 500 index and Nasdaq composite.

Trump Trade War Threats Step Up

This isn’t the first time Trump has threatened to impose tariffs on every last dollar of imports from China. On Sept. 17, when the Trump administration said it was going ahead with tariffs on $200 billion in Chinese imports, Trump warned Beijing not to retaliate. “If China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports,” Trump said in a statement announcing tariffs.

Trump’s action at the time was more severe than Wall Street had anticipated. Instead of the 10% tariffs expected, Trump also announced the escalation to 25% on the $200 billion in imports effective Jan. 1. Yet Beijing, if anything, responded less aggressively than expected. Its retaliatory tariffs on $60 billion in U.S. imports ranged from 5% to 25%.

The Trump administration didn’t follow up with the immediate escalation that had been threatened, which may have raised hopes for an eventual deal. But there hasn’t been a hint of progress since then and now Trump seems to have run out of patience.

Could this just be a winning strategy by Trump to finally force Beijing to make big concessions at the November meeting? That seems unlikely given that Beijing has said the trade conflict is a matter of national honor. China has refused to negotiate under threat and has demanded to be treated as an equal.

While JPMorgan, UBS and other Wall Street firms have said they expect Trump will eventually hit the full half-trillion in Chinese imports with tariffs, the timetable just moved up. If the Trump admininstration proposes tariffs on the remaining $267 billion or so in Chinese imports in December, the policy could be in place before spring, after a 60-day comment period.

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The post Dow Jones Reverses Lower As Trump Tariffs Threatened On All Chinese Imports appeared first on Investor's Business Daily.

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