US Stocks plunged on Friday after China announced that it will impose additional tariffs on US imports worth about 75 billion US dollars.
At midday, the Dow Jones Industrial Average was down 321.11 points, or 1.22 percent, to 25,931.13. The S&P 500 fell 37.15 points, or 1.27 percent, to 2,885.80. The Nasdaq Composite Index decreased 111.03 points, or 1.39 percent, to 7,880.35.
According to a statement released by China's Customs Tariff Commission of the State Council on Friday, a total of 5,078 US products will be subject to additional tariffs of 10 percent or 5 percent. The tariff hikes will be implemented in two batches and take effect at 12:01 p.m. Beijing time (0401 GMT) on Sept. 1 and at 12:01 p.m. (0401 GMT) on Dec. 15, respectively.
China's imposition of additional tariffs is a forced response to US unilateralism and trade protectionism, the commission said.
The US government announced on Aug. 15 that it will impose additional tariffs of 10 percent on Chinese goods worth about 300 billion US dollars, effective on Sept. 1 and Dec. 15, respectively, in two batches.
The news came at a time when the US market has already been worrying about a possible economic recession contributed by trade tensions between the United States and its major trading partners.
The benchmark US 10-year Treasury note briefly traded under the 2-year note, the third time the recession indicator has been triggered since Aug. 14.
The so-called yield curve inversion is seen as a recession signal by many investors, and the bond market move reflects investors' concerns that the US Federal Reserve will not act aggressively to cut interest rates.
Federal Reserve Chairman Jerome Powell delivered a much anticipated speech on Friday at the central bank's annual economic symposium in Jackson Hole, Wyoming.
Contrary to what the market had hoped, Powell did not give clear signal about further interest rate cuts. He pledged to "act as appropriate to sustain the expansion," a phrase that he has used for several times in recent months.
While Powell noted that US economy has continued to perform well overall, he pointed out three factors that are weighing on the favorable outlook, namely slowing global growth, trade policy uncertainty, and muted inflation.
He said the global growth outlook has been deteriorating since the middle of last year. Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States.
Powell talked at length about trade policy uncertainties. He said fitting trade policy uncertainty into the Fed's policy framework is a new challenge.
He said anything that affects the outlook for employment and inflation could also affect the appropriate stance of monetary policy, and that could include uncertainty about trade policy.
"There are, however, no recent precedents to guide any policy response to the current situation," said Powell.
Moreover, while monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rulebook for international trade, said Powell.
"We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives," Powell added.
Brian Rose, senior Americas economist at UBS Global Wealth Management, said the speech was balanced, reflecting the varied views of Federal Open Market Committee members.
"The speech contained no big surprises and market reaction has been limited," said Rose.
Market expectations for another rate cut in September are at 100 percent, according to the Chicago Mercantile Exchange Group's FedWatch tool.
