Stocks fell on Monday after United States President Donald Trump threatened another set of tariffs that is expected to escalate the trade war between the United States and China.
Market data showed that Shanghai Composite fell 5.6 percent while the Hang Seng of Hong Kong dropped nearly 3 percent. Stoxx Europe 600 index plunged by about 1 percent. Oil futures are down to its lowest level following its recovery from a month ago.
The United States market started rough because of the announcement. The Dow fell 450 points at the open before it recovered some of its losses.
The hopes that China and the United States closes a deal crashed after the announcement. The announcement was made by the United States president during the weekend. The threat is expected to stir the developments of the negotiations.
The announcement is contrary to the prior statements of both sides that they are about to conclude the prolonged trade conflict between the two powerful nations. The trade war caused the two sides to impose billions of tariffs on both sides' products which caused economic tremors to both sides and other nations that are dependent on trade with the two nations.
Trade talks are scheduled to start on Wednesday. According to the report of The Wall Street Journal, China is now considering to pull out of negotiations with the United States. A spokesperson for the Chinese government said that their delegation still prepared to go to the United States.
According to Tao Wang, an economist at UBS, the threat from the United States President is a "big surprise" following weeks of positive developments on trade. She added that the intention of the threat is still not clear whether it is a shift in position or a negotiation tactic. She also said that, for now, one thing is almost certain: financial markets will react sharply to the suddenly increased risk of a full-on US-China trade war.
The United States president announced on Sunday that he will increase the tariffs this Friday on $200 billion Chinese goods from 10 percent to 25 percent. He also said that he will impose a tax to nearly all the exports of China to the United States. Trump thinks that the progress of the talks was too slow. The announcement of the president caught investors off guard. This year, stocks went sharply high because of the signal that a trade deal was imminent.
