Markets Sink As Hopes For A Quick Trade War Deal Fade

china trade war

U.S. stocks plunged on Tuesday afternoon after investors lost all the hopes they had on the U.S.-China trade war ceasefire. As of 2:45 p.m. the Dow was down 650.44, or 2.52%, to 25,175.99, the Standard & Poor’s 500 slipped 65.29 points, or 2.34%, to 2,725.08.

Meanwhile, tech-dominated Nasdaq Composite took a dive of 219.02 points, or 2.94%, to 7,222.49 with stocks of Apple, Inc., Inc. and Alphabet, Inc. losing more than 3% each.

U.S. President Donald Trump and his Chinese counterpart Xi Jinping agreed over the weekend to call off on any further tariffs on each other’s goods on Jan. 1, in a move aimed at allowing trade talks between the two superpowers.

The two presidents made the agreement during the G-20 summit that was held in the Argentina capital of Bueno Aires. The news sent stocks surging on Monday, with the Dow rallying more than 300 points.

Wall Street initially welcomed the news, with the Dow gaining more than 500 points before the opening bell on Monday. However, President Trump on Tuesday morning posted a series of tweets on that left investors questioning the trade war truce.

Trump tweeted, “The negotiations with China have already started. Unless extended, they will end 90 days from the date of our wonderful and very warm dinner with President Xi in Argentina. Bob Lighthizer will be working closely with Steve Mnuchin, Larry Kudlow, Wilbur Ross and Peter Navarro.”

According to Scott Brown, an economist at Raymond James in St. Petersburg, Washington and Beijing only decided to hold off further tariffs for now, but it isn’t very clear what they really agreed on. If the two parties fail to reach a consensus, new tariffs are likely to be implemented. On top of that, the tariffs that are already in place are not going to away soon.

The president posted another tweet saying, “On seeing whether or not a REAL deal with China is actually possible. If it is, we will get it done. China is supposed to start buying Agricultural product and more immediately. President Xi and I want this deal to happen, and it probably will.”

“But if not remember, I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs.”

On Monday, U.S. stocks of automakers rallied after Trump said that China agreed to lower import tariffs on vehicles made in America. “China is supposed to start buying Agricultural product and more immediately,” he tweeted. “President Xi and I want this deal to happen, and it probably will.”

The comments also sent stocks of Chinese car makers on a run for the top as investors hoped the move could revive the local auto market, which is on the verge of reporting its first annual sales fall in nearly ten years.