U.S.-China Trade War Intensifies After China Manipulates Currency; Dow Plunges More than 950 Points

  • As the trade war intensifies between the U.S. and China, the stock market absorbed the effects with the Dow plunging 954 points on news that China has retaliated against President Trump’s latest tariffs.
  • Historically, China has controlled its currency, the yuan, and on Monday, it let it fall to the lowest level against the dollar in more than a decade.
  • Trump tweeted that China was involved in currency manipulation: “China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”
  • Heading into worst-day territory for the year, the S&P fell nearly 3.7% while the NASDAQ dropped 4.3%. All three major indexes “have also fallen more than 5% from their record highs set last month.”
  • Last week, Trump announced an additional 10% tariff on the remaining $300 billion worth of Chinese imports since the president said that China hadn’t honored previous commitments it made to the U.S.
  • Additionally, “the Federal Reserve failed to signal it would be as aggressive as the market hoped in backstopping the economic slowdown.”
  • Peter Boockvar, chief investment officer at Bleakley Advisory Group, said: “Now we have a trade situation that is going off the rails as the side effects multiply due to the ramping up of the use of tariffs and we are only further apart from any resolution with the Chinese.”
  • Boockvar continued: “The policy of using tariffs as a tool to address our legitimate beefs with the Chinese has failed miserably.”
  • Julian Evans-Pritchard, senior China economist at Capital Economics, wrote that China “appears to have decided that, given the increasingly dim prospects of a trade deal with the U.S., the boost to China’s export sector from currency depreciation is worth attracting the ire of the Trump.”
  • Evans-Pritchard continued: “The fact that they have now stopped defending 7.00 against the dollar suggests that they have all but abandoned hopes for a trade deal with the U.S.”

Reference Links

  • CNBC: Dow plunges 950 points in worst drop of 2019 as losses accelerate into the close READ
  • Markets Insider: Stocks are tumbling towards their worst day of 2019 READ
  • MarketWatch: These stocks have plunged the most since Powell and Trump crashed investors’ party READ

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