Fearing an escalation of the trade war with China, stock markets plummet… then rally

Stock markets declined today as investors worried about the potential for an escalating trade war with China sold off shares.

Markets had been trading near or above all-time highs before President Donald Trump threatened to significantly increase tariffs on Chinese goods. The news sent stock markets into a free-fall in mid-day trading, but the markets staged a late-day surge to end the day with less severe declines.

The escalating war of words between U.S. and Chinese officials and trade negotiators sent markets plummeting. Roughly $200 billion worth of Chinese imports are at issue, with the president threatening to bump tariffs to 25%, up from 10%.

At one point, the Dow Jones Industrial Average was down more than 600 points before ending the day at 473 points down, thanks to a late-day rally, which made up some of the losses.

The heart of the issue between the U.S. and China is American negotiators accusing the Beijing government of reneging on commitments it had already made in trade talks.

Investors were fearful that tariffs on Chinese goods could mean a slowdown in U.S. exports and cause some belt-tightening among consumers, who would see prices rise for a number of goods.