Dow Plunges 237 Points as Trump Threatens China with Higher Tariffs
The Dow and broader U.S. stock market declined on Tuesday, as the threat of a prolonged trade war with China weakened investors’ appetite for riskier assets. According to Citigroup, Dow blue-chip Apple could be one of the biggest casualties of an escalating tariff war.
Dow’s Major Reversal
After reporting gains of 132 points, the Dow Jones Industrial Average turned sharply lower in afternoon trading. The blue-chip index would fall 237.92 points, or 0.9%, to close at 25,347.77. The index rose on Friday but failed to stem a week-long slide. It has now dropped in each of the last five weeks.
The broad S&P 500 Index of large-cap stocks fell 0.8% to 2,802.37. Ten of 11 primary sectors finished in negative territory, with consumer staples and utilities leading the declines.
The Nasdaq Composite Index held onto gains for longer than its counterparts, but it too succumbed to selling pressure late in the day. The technology-focused index closed down 0.4% at 7,607.35.
Trump: We’re Not Ready to Make a Deal with China
On Monday, President Trump said his country isn’t ready to make a deal with China unless fairer terms are negotiated. The remarks were made in Tokyo at a joint press conference with Japanese Prime Minister Shinzo Abe.
“I think they probably wish they made the deal that they had on the table before they tried to renegotiate it,” Trump said, according to CBC News. He added that tariffs, already at 25%, could increase “very substantially.”
The U.S. president is scheduled to hold a face-to-face meeting with Chinese counterpart Xi Jinping at next month’s G20 summit on Osaka, Japan. Both sides were hoping to get a deal in place in time for the meeting, but that seems highly unlikely now.
Negotiations broke down earlier this month after China reneged on a pending agreement. Beijing says it shifted focus because the Trump administration was planning to make big concessions.
Apple in the Crosshairs
Earlier this year, Apple Inc. (AAPL) warned investors to brace for weaker Chinese sales of its popular iPhone product over growing competition from mainland producers. Although the company’s latest earnings call was better than expected, a tit-for-tat trade war could spell doom for the company’s China aspirations.
Now, Citigroup has warned that iPhone sales could be cut in half due to the trade war. China accounts for 18% of the company’s total sales, which means tariffs on the iPhone maker could spell trouble.
“We are proactively slashing our iPhone unit sales as we believe the US/China trade situation will result in a slowdown of Apple iPhone demand in China as China residents shift their purchasing preference to China national brands,” Citi said, as it lowered Apple’s stock price target to $205 from $220.
Featured image courtesy of Shutterstock. Chart via Stockcharts.com.