Wall Street plunged Monday morning after crucial trade talks with China appeared to collapse, renewing fears of an all-out trade war between the world's two largest economies.
The Dow Jones Industrial Average fell by 450 points at the opening bell, with the S&P 500 down 1.55 percent and the Nasdaq sliding 2.2 percent.
The market turmoil began Sunday after President Donald Trump slammed China in a surprise early morning tweet that said he would slap tariffs on almost all imported goods starting Friday. Futures on the Dow Jones Industrial Average immediately fell by over 500 points, with the S&P 500 and Nasdaq each sliding by 2 percent before markets opened. Chinese markets tanked by 6 percent.
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"The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!" Trump tweeted. "The 10% will go up to 25% on Friday. 325 Billions Dollars....of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%."
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Trump doubled down on that message on Monday, tweeting, "The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!"
Chinese officials have threatened to completely withdraw from upcoming trade negotiations set for this week, according to CNBC. A 100-person delegation led by Chinese Vice Premier Liu He was scheduled to arrive in Washington on Wednesday. However, a spokesman for China’s Ministry of Foreign Affairs said Monday some of that team was still “preparing to travel to the U.S. for the trade talks.”
The massive selloff triggered by Trump's tweets comes as markets were settling down after a slew of positive economic metrics assuaged fears of a global slowdown, and after comments from Washington that indicated the negotiations between the two sides were progressing well.
Treasury Secretary Steven Mnuchin, who visited Beijing last month, along with U.S. Trade Representative Robert Lighthizer, had characterized the deal as "getting into the final laps."
"I think both sides have a desire to reach an agreement," he told The New York Times in April. "We’ve made a lot of progress.”
Vice President Mike Pence also conveyed an upbeat sentiment, telling CNBC on Friday, “I think President Trump remains very hopeful.”
“This has all the makings of a complete disaster that could lead the stock market to crater this week and send those external risks to the U.S. economic outlook soaring,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “For weeks now markets have been lulled to sleep on the U.S. trade war with China thinking an agreement was imminent. No more.”