Things were going great for wall street. Then the trade war heated uphttps://indianexpress.com/article/world/things-were-going-great-for-wall-street-then-the-trade-war-heated-up-5760851/

Things were going great for wall street. Then the trade war heated up

In early May, President Donald Trump threatened new tariffs on Chinese products, shattering the calm as markets began a tailspin that was capped with a 1.3% drop for the S&P 500 on Friday.

Things were going great for wall street. Then the trade war heated up
(Representational

By Matt Phillips

Stocks began 2019 with the snappiest start in more than three decades, as the economy grew faster than expected, the Federal Reserve seemed to abandon its plans to keep raising interest rates, and trade-war rancor between Washington and Beijing seemed to end. By April 30, the S&P 500 had reached a record.

Then the tweets on trade began. In early May, President Donald Trump threatened new tariffs on Chinese products, shattering the calm as markets began a tailspin that was capped with a 1.3% drop for the S&P 500 on Friday.

The benchmark index ended May down 6.6%, its first monthly decline of the year and its worst drop since an ugly sell-off at the end of 2018.

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The decline on Friday came after Trump tweeted that he would impose a new tariff on all imports from Mexico — a tax that could rise to as high as 25% — unless the country’s government took steps to address the flow of migrants across the U.S. border, and Beijing announced plans to unveil a blacklist of foreign companies and people. China’s move was seen as a retaliation against the Trump administration’s efforts to deny American technology to Chinese companies.

Earlier this month, the White House issued an order effectively barring sales by Huawei, China’s leading networking company, broadening the conflict away from trade deficits and toward the difficult-to-resolve issues of technological dominance.

“I think in some sense, the Huawei ban was a bigger deal,” said Maneesh Deshpande, a market strategist at Barclays in New York. “It really opened up a new front in the trade war.”

Investors worldwide responded by pricing in the growing economic cost to the fight. Stock markets in trade-dependent economies such as Japan, South Korea and Germany also saw steep losses in May.

On Friday, the drop in American stocks was sweeping: Investors dumped industrial and machinery stocks, shares of consumer products companies and those of giant tech companies.

Firms with close links to Mexico suffered, in light of the threat of new tariffs. Large automakers, with complicated supply chains that crisscross the border between Mexico and the United States, were particularly hard hit: Ford was down 2.3% and General Motors fell 4.3%