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Dow Jones drops as China retaliates with tariffs on US goods

The Dow Jones tumbles 600 points as China retaliates against the US in a trade dispute.

The US-China trade war continues with China retaliating against US tariffs on Chinese-made goods. China will increase taxes on of $60 billion worth of US imports by as much as 25%, worrying investors and causing the Dow Jones to plummet by as much as 700 points.

How is the US-China trade war impacting Wall Street?

The US-China trade impasse will affect many US businesses that trade with China and use the nation’s imported goods. China’s finance ministry released a statement noting that the tariff increase is in response to the US raising tariffs on Chinese imports by 25%.

‘China’s adjustment on additional tariffs is a response to US unilateralism and protectionism. China hopes the US will get back to the right track of bilateral trade and economic consultations and meet with China halfway,’ said the ministry in a statement.

US President, Donald Trump, tweeted about China's President, Xi Jinping, and the US-China trade deal falling through.

‘You[China] had a great deal, almost completed, & you backed out!’ tweeted Trump.

Will the US-China trade war hurt the US economy?

IG analyst, Kyle Rodda, noted that an escalation of tariffs on all goods imported and exported between China and the US would hurt the global economy. According to the Federal Reserve Bank of New York, the current round of tariffs caused US businesses to pass costs totaling $1.4 billion a month on to consumers.

Though there is pessimism about the US-China trade impasse, Neel Kashkari, Minneapolis Fed Chair president, said that the US economy is strong enough to withstand the latest taxes.

‘Relative to China, the US is in a very strong position. Not only is our economy bigger, our economy is much less sensitive to trade. Trade is important to the US economy, but it’s much more important to the Chinese economy, just as a share of its economy,’ said Kashkari.

‘So if there’s a tit-for-tat strategy, and I’m not advocating it, but a tit-for-tat strategy would seem to lean toward the US strength rather than the China strength,’ added Kashkari.

With the US-China trade talks collapsing and tariffs increasing, investors will see how the latest conflict between the two nations will play out.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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