U.S. stock index futures fell sharply on Wednesday after China announced more levies on U.S. goods, striking back against President Donald Trump’s reciprocal tariffs that took effect earlier in the day.
The world’s second-largest economy would impose additional tariffs of 84 per cent on all U.S. goods as of Thursday, up from the 34 per cent previously announced, China’s Finance Ministry said.
Beijing said it was also launching an additional suit against the U.S. at the World Trade Organization and placed further restrictions on American companies’ trade with Chinese companies.
“If the U.S. insists on further escalating its economic and trade restrictions, China has the firm will and abundant means to take necessary countermeasures and fight to the end,” the Ministry of Commerce wrote in a statement introducing its white paper on trade with the U.S.
As hopes of concessions faded and tariffs on dozens of countries began, investors ramped up their exit from stocks, industrial commodities and even government bonds.
The CBOE Volatility index — seen as Wall Street’s “fear gauge” — was hovering near its highest level since August.
“I do think that this is a game of ‘chicken’ in the sense that both sides are upping the barriers,” said Peter Andersen, founder of Andersen Capital Management.
“What we’re seeing now is a complete correlation between any news related to tariffs and the stock market reactions.”
Prospects of tariff deals had lifted U.S. equities on Tuesday, sparking a rally early in the session, though gains were not sustained and all three major indexes closed down.
Since Trump unveiled his tariffs last Wednesday, the S&P 500 has shed more than $5.83 trillion US in market value and will confirm a bear market if it closes more than 20 per cent below its record high. As of last close, it was down 19 per cent from its peak.
The seemingly wholesale push out of treasuries and the dollar, effectively the backbone of the global financial system, could be symptomatic of a broader loss in investor desire to hold U.S. assets in general and “the end of an era,” according to Deutsche Bank head of foreign exchange research George Saravelos.
“We are witnessing a simultaneous collapse in the price of all U.S. assets including equities, the dollar versus alternative reserve FX and the bond market. We are entering uncharted territory in the global financial system,” he said.
European markets fell as well. Germany’s DAX slipped 2.5 per cent to 19,762.13. In Paris, the CAC 40 declined 2.6 per cent to 6,917.13. Britain’s FTSE 100 gave up 2.6 per cent to 7,704.82.
