Wall Street stocks plunged on Monday after a forceful response by Beijing to the latest US tariff announcement escalated an ongoing trade war, exacerbating global growth worries.
The Dow Jones Industrial Average sank 2.9 percent or around 770 points to 25,717.74 in the worst session of the year.
The broad-based S&P 500 slumped 3.0 percent to 2,844.74, while the tech-rich Nasdaq Composite Index tumbled 3.5 percent to 7,726.04.
Stocks opened sharply lower after China’s currency tumbled below 7.0 against the dollar, seen as a retaliatory step after US President Donald Trump announced last week he would impose 10 percent tariffs on $300 billion in Chinese imports.
Stocks pushed lower following weak US services sector data and went lower still after Chinese state media reported that Chinese firms have stopped buying US farm produce.
China’s purchase decision means more pain for the US agricultural sector, which could hit the farm states that helped elect Trump in 2016.
Analysts offered a range of views on whether Monday’s moves by Beijing will lead to further tit-for-tat moves.
Chris Krueger, a Washington strategist at Cowen, an investment bank, said of China’s rebuttal, “on a scale of 1-10, it’s an 11,” compared with other possible measures.
The actions “seem designed for maximum political impact,” he said. “We expect a quick (and possibly intemperate) response from the White House and consequently expect a more rapid escalation of trade tensions.”
“Negotiations will continue to take place,” said Alan Skrainka of Cornerstone Wealth Management. “What we’re seeing is hardball negotiations playing out in the public eye.”
Losses were broad-based but some companies suffered especially bruising declines.
Apple, which manufactures iPhones and other goods in China, shed 5.2 percent.
Chip companies, which also import from the country, including Intel and Micron Technology lost 3.5 percent and 4.9 percent respectively.
Retailers experienced another painful session in the wake of Trumps’ latest tariff, with Macy’s, Best Buy and Ralph Lauren all off more than three percent.