Stocks suffer worst drop of the year after China counters tariffs with cheaper currency

Major stock indexes dropped dramatically on Wall Street on Monday, their worst loss of the year, after China countered President Donald Trump’s latest tariff threat by letting its currency weaken to the lowest level in more than 10 years.

Investors fear that the escalating trade war between the two giant economic powers could do lasting damage to the world economy.

They responded Monday by dumping stocks and shoveling money into U.S. government bonds, which are considered ultra-safe. That sent bond yields sharply lower.

The Dow Jones Industrial Average sank 767 points, or 2.9%, to 25,717.

The S&P 500 fell 87 points, or 3%, to 2,844. The Nasdaq fell 278 points, or 3.5%, to 7,726.

Technology companies, which would stand to suffer in a protracted trade war, took the biggest losses. Apple gave up 5.2%.

China let its currency, the yuan, drop to its lowest level against the dollar in more than a decade, a move that Trump railed against as “currency manipulation.” It followed his own tweets last week that threatened tariffs on about $300 billion of Chinese goods, which would extend tariffs across almost all Chinese imports.

The escalations in the trade war between the world’s largest economies are rattling investors already unnerved about a slowing global economy, falling U.S. corporate profits and possibly too-weak inflation.

“The Great China Trade Deal evaporated before our eyes last week and investors should stop hoping it back into existence,” Christopher Smart, head of the Barings Investments Institute, wrote in a report.

Losses were steep and worldwide as the sell-off that began Monday in Asia swept westward through Europe to the Americas. Investors in search of safety herded into U.S. government bonds, which sent yields plunging lower.

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8 thoughts on “Stocks suffer worst drop of the year after China counters tariffs with cheaper currency

  1. So now that “Investors” have converted so much of their equity holdings into Cash what will they now do with the Cash? Buy U.S. Treasuries? Ah, but the Fed just lowered interest rates 25 basis points. If “Investors” rush to buy U.S. Treasuries will that drive up the “Price” of Treasuries which means Lower the applicable interest rates? Or will the “Investors” hold their Cash and wait for the signal to buy back in? In either even there is a lot of Cash now somewhere looking for a place to go to work.

    But wait! The ChiComs have cut the value of the Yuan to the lowest level in 10 years. Will the “Investors” buy Yuan anticipating an eventual reversal? Will they buy ChiCom Bonds or other ChiCom instruments anticipating appreciation at some point.

    Who knows what actions lurk behind the closed doors of the “Investors”? Where is the Shadow when we need him?

    Steve Baranyk – Carmel/Westfield

    1. If the tariffs are so bad for the US, how come the economy has done nothing but grow in the year or more since they were instituted?

      The truth is we never had free trade in the first place, which is why we typically run such huge trade deficits.

      Should Trump just say, “Oops, nevermind!” so that we can go back to how it was before? Just out of curiosity, how much more wealth and how many more jobs do you think we should ship to China?

      This stuff isn’t easy, and Trump isn’t perfect, but st least he’s trying to fix a problem that hasn’t been solved in decades.

    2. I follow it quite well. We can’t continue to be a country of consumers who produce nothing here. People are screaming for $15 an hour to work at a fast food restaurant when in reality those jobs weren’t meant to support a family on, they are jobs for kids in high school or seniors looking to supplement their income. The jobs that pay $15 an hour or more are no longer here because everything is made overseas.
      Not everyone needs a college education but that is drilled into children’s mind from day one. We need trades people and people who can work in manufacturing but those jobs aren’t here. I recently dealt with a project that required some steel items. The price had gone up for the item due to Trumps tariffs on steel. The company I was buying from had switched to US steel because it was cheaper now however it was still more than what I had been paying previously. The difference was $.25 per 10 feet. If I can spend $100 extra and put Americans back to work in Pennsylvania or Indiana then I’m going to do it. This steel will last the rest of my lifetime so if I have another 40 years left that evens out to a pittance I paid.
      I’m not sure when it became so bad for a president to look out for his own country instead of always worrying about other countries, I can sure tell you the president or leader of China isn’t looking out for the US.

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