Wall Street tumbles as Trump fires first shots in US-China trade war

The opening shots of President Donald Trump's trade war against China rocked Wall Street, sending stocks tumbling.

Mr Trump says the US is planning to levy tariffs on about $US60 billion of imports from China, as well as impose restrictions on technology transfers and acquisitions to counter unfair trading and investment practices.

China is planning retaliatory measures, mostly aimed at agricultural products from Trump-supporting states.

US trade officials have selected 1300 mostly high-tech product categories that might be covered by the new tariffs, which don't take effect for a couple of weeks.

The US is also taking a case to the World Trade Organisation against China’s policies and is seeking the support of other countries with similar complaints.

To this end, the US has confirmed the countries that will be exempt from already announced steel and aluminium tariffs that come into effect on Friday. These countries are Canada, Mexico, South Korea, Australia, the European Union, Argentina and Brazil.

Dow drops 724 points
At the close of trading in New York, the Dow Jones Industrial Average plummeted 724.42 points, or 2.9%, to 23,957.89, the biggest one-day fall since february 8. The S&P 500 tumbled 2.5% to 2643.69, while the Nasdaq Composite dropped 2.4% to 7166.68.

“The market is reacting to the news based on the idea there could be some sort of contagion that leads to a trade war breaking out,” says Michael Scanlon, a portfolio manager at Manulife Asset Management. “If you look at companies in the crosshairs of this, it’s Boeing and Caterpillar.”

Boeing fell 5.2% and Caterpillar 5.7%. Century Aluminum lost 18% and US Steel 11%

Tech stocks, which had been already reeling from unauthorised data transfers from Facebook to an analytics firm, were again among the biggest declining stocks.

Facebook shares dropped 2.7% to extend its decline over the past four days to 11%, while shares of Google parent Alphabet stumbled 3.7%.

Shares of financial companies have also dropped, as banks are hurt by strengthening bond prices, which gained on the tariff news.

Yields on benchmark US 10-year Treasury notes fell to 2.832% from 2.901% on Wednesday.

JPMorgan Chase shares plunged 4.2% while Goldman Sachs declined 3.5%.

AbbVie suspends lung cancer drug
Healthcare stocks also struggled after drugmaker AbbVie said it wouldn’t seek accelerated approval for a lung cancer treatment it had been working on. AbbVie shares were off 13%.

Investors were continuing to absorb the implications of the Federal Reserve’s raising of rates by a quarter of a percentage point on Wednesday, as widely expected.

The Fed lifted its forecasts for gross domestic product growth for this year and next. It also signalled rates would rise over the next three years by more than it forecast in December.

The Stoxx Europe 600 fell 1.7%, weighed down by a drop in technology shares. France’s CAC 40 fell 1.4%, Germany’s DAX dropped 1.7% and the UK’s FTSE 100 fell 1.2%. 

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