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Trade War: Dow Futures Drop Nearly 500 Points After China Mulls Skipping Trade Talks with US

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A sharp sell-off will start the week off on Wall Street as trade talks with China simmer. On Sunday President Trump tweeted that there may be an increase in tariffs, shortly after that, China indicated that it might skip trade talks.

President Trump tweeted that the current 10% levies on $200 billion worth of Chinese goods will rise to 25% on Friday. He also threatened to impose 25% tariffs on an additional $325 billion of Chinese goods “shortly.”

Further, trade talks are set to resume on Wednesday, and the President expressed that the progress of them, is moving “too slowly” as China is attempting to bargain with the terms of the deal.

In response to Trump’s tweet, China is said to be considering canceling trade talks with the United States this week. The potential cancellation was reported by a source that spoke with the Wall Street Journal regarding the matter.

“Another turn of the screw tighter Sunday from the President’s hardball tactics with the China trade talks, and his pair of tweets look like they could unleash a sharp stock market correction,” said Chris Rupkey, chief financial economist at MUFG Union Bank, in a note.

“For weeks now markets have been lulled to sleep on the US trade war with China thinking an agreement was imminent. No more.”

“This has all the makings of a complete disaster that could lead the stock market to crater this week and send those external risks to the US economic outlook soaring,” he added.

Trade officials “kept saying that a deal was imminent, so the market could be disappointed in the near term,” said Bruce McCain, chief investment strategist at Key Private Bank. “I think that some deal was priced into a degree … the market’s baked in a lot of positives.”

As a result of the continued conflict on Monday morning, the Dow Jones Industrial Average futures implied an opening decline of about 500 points with shares of Apple and Caterpillar down significant in the premarket.

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