Stocks closed down modestly Tuesday in wake of the Trump administration mulling up to $400 billion in new tariffs against China.
After big declines in the first hour of trading, stocks recovered much of their earlier losses. The S&P closed down 0.4 percent, while the Nasdaq fell 0.3 percent. The Dow Jones industrial average tumbled 289 points, recovering from a sharp drop of 419 points at the low.
The worst stock declines hit those companies with the biggest business connections to China.
“Ford Motor, which also does a large amount of business in China, saw its stock pull back about 0.8 percent. Meanwhile, Caterpillar and Boeing— considered to be two bellwethers for trade tensions on Wall Street —both dropped at least 3.5 percent,” reports CNBC.
On the other hand, smaller U.S. companies performed much better. The Russell 2000 index of small-cap stocks ended the day slightly positive, suggesting that investors see little domestic impact from the trade dispute and anticipate its impact to largely be confined to the overseas businesses of large global companies.
On Monday, President Donald Trump ordered the U.S. Trade Representative to propose new tariffs on Chinese products unless Beijing reverses its “unfair,” trade practices.
“I directed the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent,” Trump said. “After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.”
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