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Dow Collapses After Unhinged Trump Obliterates Stock Market

May 6, 2019

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By CCN: The Dow suffered a full-blown crisis on Monday, as the US stock market suffered a brutal collapse after President Trump single-handedly destroyed months of US-China trade war progress and threw the entire trade deal into jeopardy.

Dow Careens Toward 400 Point Crash

The Dow Jones Industrial Average plunged more than 400 points at the opening bell, reflecting a devastating pre-market session that saw DJIA futures crash as much as 500 points. By 9:35 am ET, the Dow had lost 406.74 points or 1.53% to trade at 26,098.21. The S&P 500 and Nasdaq joined in the free-fall, plummeting 1.42% to 2,903.81 and 1.7% to 8,025.22.

The Dow crashed more than 400 points at the opening bell as global stock markets reeled from Trump’s trade war bombshell. | Source: Yahoo Finance

For months, the Trump administration had carefully massaged the trade war narrative, celebrating every inch of incremental progress and downplaying potential setbacks. That strategy succeeded in pumping the Dow, which roared back to life in 2019, in no small part due to trade deal optimism.

Today, a reckoning has come for the stock market, courtesy of President Trump’s trigger-happy Twitter thumbs.

Trump Stuns Global Markets With Reckless Tariff Threats

On Sunday, Donald Trump shocked the global markets when he wrote two tweets savagely attacking China and threatening to slap more tariffs on the world’s second-largest economy.

Defying conventional economic wisdom, he alleged that current tariffs are “partially responsible for our great economic results” and had “little impact on product cost” for US consumers.

Trump also accused China of trying to renegotiate the trade deal after the finish line was already in sight. “No!,” he screeched.

….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!

— Donald J. Trump (@realDonaldTrump) May 5, 2019

This morning, Trump tried to defend himself, alleging that the US has been “losing…500 Billion Dollars” a year to China through an uneven trade relationship. “Sorry, we’re not going to be doing that anymore.”

The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!

— Donald J. Trump (@realDonaldTrump) May 6, 2019

Analysts say that Trump’s tweets risk derailing the entire US-China trade agreement.

“Risks of a full blown trade war are escalating,” warned Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte. in Singapore, according to Bloomberg. “Trump’s threat may backfire as China will not want to negotiate with a gun pointing at their heads.”

“China isn’t likely to make concessions that the U.S. want with a big stick hanging over its head,” added Zhou Xiaoming, a former Ministry of Commerce official and diplomat. “If the tariffs that Trump threatens are implemented on Friday, China has to respond.”

For now, China plans to proceed with a trip to the US, though it appears that Beijing’s foreign ministry might send a warning to Trump by delaying the trip.

Trump Tweets Terrify Stock Market

Trump’s trade war bombshell sent a chill through stock markets worldwide, and it looks poised to wipe hundreds of points off the Dow. | Source: AP Photo / Richard Drew

So what does all this mean for the stock market? That’s what Wall Street is frantically trying to figure out.

Writing in a note to clients, Michael O’Rourke, chief market strategist at Jones Trading, said that it remains unclear whether Trump is bluffing to squeeze a few more concessions out of Beijing before the two sides put pen to paper on the trade deal or if US-China relations truly risk reverting back to their 2018 stalemate.

“The challenge for investors is deciphering whether this another bluff by the president, an attempt to lower expectations in order to provide an upside surprise or actually a potential breakdown of the trade negotiations and an escalation of the trade war.”

Based on Monday’s brutal stock market sell-off, it’s clear which way investors are leaning.

Click here for a real-time Dow Jones Industrial Average price chart.

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