Stock Markets Suffer Significant Losses After Trump Responds Angrily to China's Retaliatory Tariffs

The three main U.S. stock indices suffered significant losses on Friday after President Donald Trump responded angrily to China's announcement that it would be levying retaliatory tariffs against the U.S. in the latest escalation of the long-running trade war between the world's two largest economies.

China said Friday morning that it would levy tariffs of 5 and 10 percent on $75 billion of U.S. goods. The tariffs, which would affect imports including soybeans, automobiles and oil, will take effect on September 1 and December 15, matching the dates when the Trump administration has said it will impose new tariffs on imports from China.

Trump responded with a series of tweets taking aim at China's policies on intellectual property, which he has alleged amount to theft, and threatening a response this afternoon.

"We don't need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China," the president wrote.

The president posted his tweets at 10:59 a.m. Eastern time. At 11 a.m. Eastern time, the Nasdaq, Dow Jones industrial average and S and P 500 all began suffering large downward slides. The Dow Jones eventually dropped 2.1 percent, while the S&P 500 declined 2.2 percent and the Nasdaq shed 2.7 percent. Bond yields also suffered on Friday, while the CBOE Volatility Index increased as much as 26 percent.

In June, more than 300 business executives piled into Washington to protest against tariffs that Trump had threatened to impose on Beijing.

Although the president eventually withdrew the threat, he announced earlier this month that tariffs on $300 billion of goods imported from China would be subjected to tariffs on September 1. He again modified his threat, announcing the delay of some of the tariffs until December 15 in statements that appeared to acknowledge what Trump has long denied: consumers and businesses are bearing the cost of the trade war.

China has used the tariffs to target some groups who voted overwhelmingly for Trump in 2016. Farmers, in particular, have been hit hard by the tariffs. They sent $19.5 billion of agricultural products to China in 2017, but that number had declined to $5.9 billion in 2018. Even so, farmers have steadfastly maintained their support for Trump, with 78 percent saying they think the trade dispute with China will be resolved in a way that benefits U.S. agriculture, according to the latest producer survey from the Purdue Center for Commercial Agriculture.

President Donald Trump signs a proclamation that will eliminate student loan debt for qualifying disabled veterans following a speech at the American Veterans (AMVETS) 75th National Convention at the Galt House on August 21 in Louisville, Kentucky. Scott Olson/Getty Images