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The Journal Gazette

  • Associated Press Trader Michael Urkonis works on the floor of the New York Stock Exchange on Wednesday. Stocks opened lower on Wall Street following declines in Europe and Asia, after Washington threatened to expand tariffs on Beijing. 

Thursday, July 12, 2018 1:00 am

Markets shrink amid trade war

After Trump's threat to expand tariffs on Chinese goods

MARLEY JAY | Associated Press

NEW YORK – Global stock indexes sank Wednesday after the Trump administration released a list of $200 billion in goods that could be hit with tariffs and China said it would retaliate.

The dollar spiked and big exporters plunged.

Companies that sell computer chips, oil, basic materials and heavy machinery dropped after the Trump administration proposed a 10 percent tax on a wide list of imports. It is scheduled to make a decision on the potential tariffs after Aug. 31.

China's government said it will take “firm and forceful measures” if the new tariffs are enacted. That response would likely include measures other than tariffs. Trump has threatened to put new taxes on almost everything the U.S. imports from China.

Jack Ablin, chief investment officer for Cresset Wealth Advisors, said the tariffs can have big effects: A tariff on an import from one country can lead to broad price increases for similar items, and rising taxes and costs might cause companies to change their supply lines in less efficient ways.

“When you start adding all of that together, you end up with typically higher inflation and low productivity,” he said. “Higher inflation tends to rob consumers of their income and lower productivity tends to rob companies of their profits.”

A four-day winning streak for the S&P 500 ended as the benchmark index lost 19.82 points, or 0.7 percent, to 2,774.02. The Dow Jones Industrial Average dropped 219.21 points, or 0.9 percent, to 24,700.75. The Nasdaq composite fell 42.59 points, or 0.5 percent, to 7,716.61. The Russell 2000, an index of smaller and more U.S.-focused companies, gave up 11.96 points, or 0.7 percent, to 1,683.66.

The S&P 500 had closed at a five-month high Tuesday.