Global markets sank Tuesday on fears that the United States and China may be veering toward an all-out trade war.
With the sell-off, the Dow has wiped out all its gains for the year. Tuesday’s close marked the sixth straight daily loss for the blue-chip composite of 30 stocks — its longest sustained slide in 15 months.
The Standard & Poor’s 500-stock index declined 11 points, or 0.4 percent, to 2,762. The tech-heavy Nasdaq Composite fell 0.28 percent, to 7,725.
As the markets fell, the White House made available one of the president’s chief trade advisers to explain the latest moves and to push back against critics.
“Our view is that these actions are necessary to defend this country and that they are ultimately bullish for corporate America, for the working men and women of America and for the global trading system,” said Peter Navarro, who heads the White House office of trade and manufacturing policy.
One investor noted the brinkmanship of Trump’s strategy.
“Trump is playing a game of chicken: Who will blink first?” said Ivan Feinseth, chief investment officer at Tigress Financial Partners. “Trump is betting that China understands they have more to lose in the tariff war because we import more from them than they do from us, like five times more.”
The declines in the U.S. markets followed a global rout. Asian benchmarks were hit the hardest, with Shanghai closing down 3.78 percent, its biggest drop in two years, and Shenzhen down 5.31 percent. Hong Kong’s Hang Seng Index finished down 2.78 percent. The Japanese Nikkei 225 lost 1.77 percent.
European markets also slid on the worries of global trade disruption. The FTSE 100 in London was off 0.36 percent. The German DAX was hit particularly hard, down 1.22 percent. The Stoxx Europe 600 was down 0.70 percent, and France’s CAC 40 had slipped more than 1.1 percent.
The S&P 500 is still hovering above the flatline for 2018, having gained 3.33 percent on the year so far following Tuesday’s close.
The benchmark reached a high of 2,872.87 on Jan. 26. Then it dropped more than 10 percent into an official correction, hitting its year-to-date low of 2,581 on Feb. 8. The S&P has been hovering in between since. After Tuesday’s close, the index is down 3.84 percent from its Jan. 26 high, and is 7.04 percent above the Feb. 8 low.
Worries about a U.S.-China trade war have been brewing for most of the year as the two countries have exchanged threats.
On Monday, President Trump threatened tariffs on nearly all of China’s products shipped to the United States unless Beijing agrees to sweeping trade concessions.
“The trade relationship between the United States and China must be much more equitable,” Trump said. “The United States will no longer be taken advantage of on trade by China and other countries in the world.”
Trump said he had ordered his chief negotiator, U.S. Trade Representative Robert E. Lighthizer, to draw up a list of $200 billion in Chinese products that will be hit with tariffs of 10 percent if China refuses his demands to narrow the yawning U.S. trade deficit and change its industrial policies.
The president warned he was prepared to hit China with an additional $200 billion in import taxes unless Beijing capitulates. None of the tariffs could take effect for 60 days.
In a statement published shortly after Monday’s announcement, China’s Ministry of Commerce called the threat “blackmail.”
“If the U.S. loses its senses and publishes a new list, China will be forced to take comprehensive measures that are both strong in quantity and gravity and will fight back,” it read.
The United States imports about $505 billion a year in goods from China. If Trump carries through on all his trade threats, the result would be higher costs on virtually all the those goods.
Goldman Sachs chief executive officer Lloyd Blankfein said that the tariff threats against with China are unlikely to result in a big economic war.
“I don’t think we’re in a suicide pact on this, so I suspect we’re not going to cause the economies to collapse,” Blankfein said in an interview at the Economic Club of New York.
Some market-watchers pointed to history as reason to think the countries will settle their differences.
“The U.S. has launched eight investigations into trade practices with China and Japan since the 1980s, and only one of those investigations actually resulted in a tariff being implemented,” said Jeff Schulze, investment strategist at ClearBridge Investments. “With the deadline being July 6, we still have close to three weeks to avoid the worst-case scenario.”
Schulze thinks the current pullback on fears of an impending trade war is overblown.
“This sell-off is a buying opportunity for long-term investors,” he said.
Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said in an email that the back-and-forth is having a negative effect.
“I take the administration at their word that this is a negotiating tactic, and I understand that if things spiral out of control, tariffs can always be walked back at any time,” Zaccarelli said. “The idea that they will knowingly drive the economy into recession seems unlikely. But the short-term damage to the markets and the impact on the economy has me concerned.”
Emily Rauhala in Beijing contributed to this report.