US stock markets sink on China trade war fears

Investors fled US stocks on Friday after Donald Trump threatened more tariffs against Chinese goods, China vowed to battle “to the end” and US employment data missed analysts’ expectations.

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The Dow Jones industrial average closed 572 points down, or around 2.3%. Boeing and Caterpillar, considered vulnerable in any trade war with China, fell by 3.1% and 3.5%, respectively.

The losses wiped out the major indexes’ gains for the week, with the S&P 500 down 1.7% and the Nasdaq down 2.2% as investors moved into haven assets such as bonds and gold.

China announced fresh tariffs on 106 US products on Wednesday. A day later, Trump asked US trade representatives to consider $100bn in additional tariffs against China.

“China, which is a great economic power, is considered a Developing Nation within the World Trade Organization,” the president tweeted on Friday. “They therefore get tremendous perks and advantages, especially over the US. Does anybody think this is fair. We were badly represented. The WTO is unfair to US.”

China’s commerce ministry said it would respond commensurate to US action.

“The Chinese side will follow suit to the end, not hesitate to pay any price, resolutely counterattack and take new comprehensive measures in response,” the ministry said via its website, citing an unnamed spokesman. The statement added that China “doesn’t want” a trade war, but is “not afraid to fight one”.

Technology stocks were also hit on the New York exchanges, with Apple and Amazon declining more than 2%. US oil stocks fell 2.3% on fears Beijing could restrict crude exports. China is the second largest importer of US oil, after Canada.

The stock market drops came despite efforts by Trump officials to downplay any likelihood that new tariffs would be enacted. The US treasury secretary, Steve Mnuchin, appearing on CNBC, said he was “cautiously optimistic” the US would reach a resolution with China.

The National Economic Council director, Larry Kudlow, told Bloomberg talks with China had not begun.

“China’s response to our complaints … has been unsatisfactory,” he said. But he also stressed there was an open line of communication, saying: “This is a moderate, tempered approach that we are taking. This is not a trade war.”

Kudlow repeated US concern over technology transfers.

“There’s no secret here,” he said. “They’ve got enormous trade and tariff barriers. They’ve got to stop their stealing of the intellectual property that we try to use in any company around the world. Those are good places to start.”

Earlier in the day, stocks were hit after the latest US jobs report missed targets. The US economy added just 103,000 jobs in March, well below the 170,000 forecast by economists polled by Bloomberg MarketWatch. The US still shows the tightest labor market in nearly two decades.