President Trump’s latest gambit in the trade wars sent shivers down the financial markets Tuesday.
The Dow Jones Industrial Average fell 287.26 points, or 1.15%, to close at 24,700.21. NASDAQ declined 21.44 points, or 0.28%, to close at 7,725.58.
Among major retail stocks, Walmart Inc.’s shares rose 0.71% to close at 83.59, Target Corp. shares fell 0.71% to 76.57, TJX Companies shares dropped 0.21% to finish at 95.75 and Macy’s Inc. shares rose 0.39% to close at 38.88. Among U.S. brand operators, VF Corp. stock dropped 1.14% to finish at 83.45, PVH Corp. shares fell 1.97% to close at 160.39 and G-III Apparel Group stock climbed 0.72% to end nthe day at 47.88.
Around the world, China’s Shanghai Composite ended the day down 3.8%, while in Europe, Germany’s Dax index was down 1.2% by the close and France’s Cac 40 had lost 1.1% and London’s FTSE 100 fell 0.36%. The CBOE Volatility Index, a gauge of market fear, hit nearly a three-week high of 14.68 points, before closing at 13.35, a 8.45% increase for the day.
“China has determined that it will raise tariffs on $50 billion worth of United States exports,” Trump said in a White House statement released Friday. “China apparently has no intention of changing its unfair trade practices related to the acquisition of American intellectual property and technology.”
Trump directed the U.S. Trade Representative’s Office on Monday to identify an additional $200 billion worth of Chinese goods that could face tariffs at a 10 percent rate, lower than the 25 percent tariff the first $50 billion worth of targeted goods will face.
Matthew Shay, CEO of the National Retail Federation, said, “Higher prices for everyday essentials and lost jobs threaten to sap the energy out of the strong U.S. economy just as most Americans are starting to enjoy the benefits of historic tax reform. This reckless escalation is the latest reminder that Congress must step in and exert its authority on trade policy.”
A study conducted earlier this year for NRF and the Consumer Technology Association found that tariffs on $50 billion of Chinese imports would reduce U.S. gross domestic product (GDP) by nearly $3 billion and lead to the loss of 134,000 American jobs. Imposing tariffs on an additional $100 billion of Chinese imports would bring the total impact to a $49 billion reduction in GDP and the loss of 455,000 jobs.
Economist Ira Epstein, speaking on TicToc by Bloomberg on Twitter, said, “With a tariff war, we will see a slowdown in GDP.” Epstein said a trade war will cause “supply chains around the world to start contracting and the cost of goods will go up.”