Stocks Fall as Trade Tensions Escalate

Tuesday - 07/05/2019 13:55
President Donald Trump speaks during a press conference with China’s President Xi Jinping at the Great Hall of the People in Beijing on November 9, 2017. Nicholas Asfouri | AFP | Getty Images
President Donald Trump speaks during a press conference with China’s President Xi Jinping at the Great Hall of the People in Beijing on November 9, 2017. Nicholas Asfouri | AFP | Getty Images
U.S. stock declines deepened, with the Dow falling more than 500 points, as investors reacted to a growing likelihood that the White House will follow through on threats to enact tariffs on Chinese goods.

After months of calm in markets, fears about an escalation of the US-China trade war roared back this week as President Donald Trump's tweets about tariffs on China sent investors into a sell-off frenzy on Monday.

World equity and oil markets slumped Monday and the stock market's "fear gauge," known as the VIX, spiked 20% after the US president threatened to raise tariffs on $200 billion worth of Chinese goods to 25% from 10% and slap new 25% tariffs on $325 billion worth of Chinese goods.

Two of the stocks caught in the crossfire were AMD and Nvidia. Both stocks fell by about 3.6%, as China is an important gaming market for the chipmakers. Shares in L Brands also slid 4.25% — the owner of Victoria's Secret and PINK described China as "an extremely important market" in April. Similarly, Arista Networks stock fell 4% as the cloud-networking group flagged that US tariffs on Chinese imports could increase its costs and reduce its sales in its latest earnings report.

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