Markets Tumble Again as U.S.-China Trade Threat Looms

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“I’m not saying there won’t be a little pain,” Mr. Trump said. He added: “But we’re going to have a much stronger country when we’re finished.”

Mr. Powell’s comments underscored the shaky position stock investors are in, buffeted almost daily by conflicting announcements from the White House and by tariff announcements from Beijing that have strained one of the world’s most important economic relationships. A deep trade freeze between the two countries could chill global growth.

So far, though, there is little evidence of a slowdown. And without one, the Fed, as Mr. Powell suggested, will probably keep raising rates, which traditionally is viewed as a drag on stocks.

The losses on Friday were especially heavy for American companies reliant on global trade. The aircraft maker Boeing tumbled nearly 4 percent, and Caterpillar, which sells lots of construction and mining equipment in China, sank more than 4.5 percent.

With China tailoring its tariffs toward American agricultural products, investors also dumped stocks tied to the sector. The fertilizer giants CF Industries and Mosaic each fell more than 3 percent, as did Deere, the farm equipment maker.

The gloomy trading day in the United States came after a mixed day elsewhere.

In Japan, the Nikkei 200 closed down 0.4 percent, while in Hong Kong, the Hang Seng ended up 1 percent. Major European benchmarks like the French CAC-40, the German DAX and the British FTSE 100 were all lower. (Mainland Chinese markets were closed on Friday.)

On Thursday, Mr. Trump said he had instructed his top trade officials to determine whether additional tariffs on $100 billion worth of Chinese imports were warranted and, “if so, to identify the products upon which to impose such tariffs.”

The comments came in a roller-coaster week for that has whipsawed investors.

“People have started to feel like this is a bit of the children’s game. Somehow the markets haven’t really gotten any actual sense of whether this will be true,” said Vincent Chan, head of China equity research for Credit Suisse, the investment bank.

“Tariffs on $100 billion of Chinese products is a big thing, but the market thinks it’s a bit of a childish move,” he added. “The market doesn’t know how to react.”

On Monday, China announced tariffs on $3 billion in American goods in response to steel and aluminum tariffs Washington imposed last month. Then on Tuesday American officials detailed plans for tariffs on roughly $50 billion in Chinese goods. China responded hours later by announcing tariffs on a similar amount of American goods.

The U.S.-China Trade Conflict: How We Got to This Point

American companies want a level playing field with their Chinese counterparts. China wants to build its industries into sophisticated global competitors. This week, both countries demonstrated a willingness to escalate trade tensions to defend their positions.


Should Mr. Trump impose more tariffs, the impact could be significant. Capital Economics, a research firm, estimated that doing so could shave up to half a percentage point from China’s economic growth rate. A change of that size could be felt around the world, as China is a major force in global growth. Last year, its economy grew 6.9 percent.

Credit Suisse estimated that the effect of tariffs might be more limited but could make Beijing more cautious in carrying out reforms to better prepare the country’s economy for future growth.

Still, many investors are betting that the two countries are grandstanding, and that they will reach a compromise to avert an all-out trade war.

One sure loser this week was the Chinese currency, the renminbi. It lost 0.7 percent of its value against the United States dollar in markets outside the mainland, its biggest weekly fall this year. Still, China tightly controls the value of its currency and could shore it up if the renminbi moves more dramatically.

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