Dow Futures Point to Miserable Tuesday Start for Wall Street

The Dow and broader U.S. stock market are set to open sharply lower on Tuesday after the United States and China went ahead with planned tariffs on each other’s goods, setting the stage for a prolonged trade war between the two superpowers.

Dow Futures Fall

U.S. stock futures declined sharply late Monday, raising the possibility of a volatile open for Wall Street the following morning. Dow Jones Industrial Average (DJIA) futures were down more than 300 points earlier in the day. At the time of writing, the September futures contract was down 118 points, or 0.5%, at 26,288.00.

Dow futures nosedive on Monday, setting the stage for a volatile post-Labor Day session on Tuesday. | Source: Bloomberg.

The S&P 500 mini futures contract declined 0.4% to 2,913.25.

Futures on the Nasdaq also fell 0.4% to 7,662.50.

U.S. stocks are coming off their best weekly gain since late June, but were unable to completely erase their losses for the month.

Trade Talks in Doubt

Futures markets were under pressure on Monday after it became apparent that the United States and China were no closer to scheduling a face-to-face meeting to continue trade talks. Last week, China’s Ministry of Commerce said both sides were already planning a new delegation, though Bloomberg poured cold water on speculation that meetings were imminent.

In the meantime, new tariffs on American and Chinese goods went into effect on Sunday. Washington slapped a new 15% tariff on roughly $110 billion worth of Chinese imports, many of which are consumer products. Beijing, meanwhile, has started implementing tariffs on $75 billion in imports from the U.S., including agricultural goods and crude oil. China plans to raise tariffs in December.

Trend Toward Escalation Is Bad for the Economy

The tit-for-tat on tariffs between the U.S. and China means two things are certain: Both sides are leaning towards escalation, not de-escalation, and the cost of the tariff war is being felt across the global economy.

That’s the view of Swiss multinational investment bank UBS, which recently warned clients to expect more volatility from the U.S.-China trade war.

“Despite headlines that go back and forth, two facts have become more and more clear over time. First, the trend is toward escalation, not de-escalation. Second, the cost of the uncertainty accumulates as time goes on without resolution, weighing on both the domestic and global economies,” UBS said in a note, as quoted by MarketWatch.

The International Monetary Fund (IMF) expects the global economy to grow 3.2% this year, according to its July estimate. If the trade war continues to heat up, investors can expect another downward revision.

Manufacturing in the U.S. and China have been hit hard by the trade-related uncertainty. Meanwhile, the Eurozone appears to be sliding toward recession after Germany, its largest and most influential member state, contracted in the second quarter due to weakening exports.

Featured image courtesy of Shutterstock. Chart via Bloomberg. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi