Trump's $60B Tariff Plan Rattles Markets, Chinese Tech Stocks

President Donald Trump implemented a new round of tariffs on imported Chinese goods.

What Happened

The Trump administration is imposing up to $60 billion of new tariffs on imported Chinese goods in response to the U.S. trade deficit with China. Trump also accused China of stealing U.S. intellectual property. The new tariffs are focused mostly on technology-related goods, but the full list of specifically-targeted goods won't be released for another two weeks.

The Dow Jones Industrial Average closed Thursday down 722 points (2.9 percent), while the S&P 500 closed down about 70 points (2.5 percent).

Why It’s Important

The latest tariffs on Chinese goods come after Trump already imposed tariffs on imported steel, aluminum and solar panels earlier this year. Investors are increasingly concerned these isolationist policies will trigger retaliation from China and even an all-out trade war. American companies that rely on international sales could be hit particularly hard by such a trade war.

Trump isn’t afraid of China’s potential retaliation and has previously said trade wars are “easy to win.”

Height Capital Markets analyst Clayton Allen said the new measures are simply intended to create negotiating leverage for the U.S.

“It’s the next step in a continuing process to push forward the stalled negotiations with the Chinese,” Allen said in a research note. “Trump wants to make quite a show of it, and his goal is to gain negotiating leverage with the Chinese.”

What’s Next

Investors will be watching closely to see which products will be targeted in the new tariffs and how China will react. Trade experts expect China to focus on U.S. agricultural exports if it chooses to retaliate. In addition, investors will be keeping a close eye on how a potential trade war escalates in coming weeks.

Here’s how the market reacted to Thursday’s news:

  • SPDR S&P 500 ETF Trust SPY was down 1.7 percent;
  • SPDR Dow Jones Industrial Average ETF DIA was down 2 percent;
  • SPDR Gold rust (ETF) GLD was down 0.5 percent;
  • iPath S&P 500 VIX Short Term Futures TM ETN VXX was up 9.3 percent;
  • PowerShares DB US Dollar Index Bullish UUP was up 0.2 percent; and
  • Bitcoin Investment Trust GBTC was down 3.9 percent.

Several Chinese technology stocks were also hit:

  • Alibaba Group Holding Ltd BABA fell nearly 5 percent;
  • JD.Com Inc(ADR) JD fell 2.3 percent;
  • Vipshop Holdings Ltd - ADR VIPS fell 8.8 percent; and
  • Baidu Inc (ADR) BIDU fell 4.7 percent.

Related Links:

What Is A Tariff And What Does It Do?

Trump: 'Trade Wars Are Good And Easy To Win'

Photo credit: Emily Elconin

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