“We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere,” Trump wrote on Truth Social. He also said “now there seems to be no reason” to meet with China’s leader, Xi Jinping, after earlier agreeing to do so as part of an upcoming trip to South Korea.
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“That was clearly not something traders wanted to hear. Things got ugly quickly,” said Steve Sosnick at Interactive Brokers in a note titled “Tariff Rug Pull.” “The reactions may say as much about recent market complacency as they do about the policy ramifications.”
Over the weekend, the US president sought to cool tensions by claiming Xi Jinping “had a bad moment” when announcing China’s new export controls.
“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!” he wrote on Truth Social on Sunday.
The latest comments sparked a wave of claims of another case of “Taco” – Trump always chickens out. The acronym has gained popularity on Wall Street as a shorthand for his behaviour over tariffs.
Meanwhile, Vice President JD Vance called on Beijing to “choose the path of reason”, claiming that Trump has more leverage if the fight drags on.
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China on Sunday said the US should stop threatening it with higher tariffs and urged further negotiations to resolve outstanding trade issues, adding it will not hesitate to retaliate should Washington persist in its measures against Beijing.
US stocks had already been facing criticism that their prices had shot too high following the S&P 500’s nearly relentless 35 per cent run from a low in April. The index, is still near its all-time high set earlier in the week.
Critics say the market looks too expensive after prices rose much faster than corporate profits. Worries are particularly high about companies in the artificial-intelligence industry, where pessimists see echoes of the 2000 dot-com bubble that imploded. For stocks to look less expensive, either their prices need to fall, or companies’ profits need to rise.
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“With markets already ripe for a pullback, the latest trade threats to China from President Trump were the tipping point to a broad selloff in equities,” said Charlie Ripley at Allianz Investment Management.
Some of Friday’s strongest action was in the oil market, where the price of a barrel of benchmark US crude sank 4.2 per cent to $US58.90. Brent crude, the international standard, dropped 3.8 per cent to $US62.73 per barrel.
They fell as a ceasefire between Israel and Hamas came into effect in Gaza. An end to the war could remove worries about disruptions to oil supplies, which had kept crude’s price higher than it otherwise would have been.
In the bond market, the yield on the 10-year Treasury sank to 4.05 per cent from 4.14 per cent late Thursday.
It had already been lower before Trump made his threats, as a report from the University of Michigan suggested that sentiment among US consumers remains in the doldrums.
In other international markets, indexes fell across much of Europe and Asia.
Hong Kong’s Hang Seng fell 1.7 per cent, and France’s CAC 40 dropped 1.5 per cent for two of the bigger moves. But South Korea’s Kospi leaped 1.7 per cent after trading reopened following a holiday.
AP, with Bloomberg and staff writers
