The stock market is always erratic, but when the Dow Jones plummets almost 800 points – 3.1% — it produces a lot of anxiety for anyone who has invested in stocks.
Market watchers said that Tuesday’s market drop was one of the worst days of 2018.
The Tuesday downer is being blamed on the vague economic agreement President Donald Trump said he reached with Chinese leader Xi Jinping on Saturday, in Buenos Aires, Argentina.
The unraveling descent was a result of the White House threatening new penalties against Beijing and multiple officials seeking to downplay expectations for an eventual deal.
Trump, in a series of Twitter posts, threatened to slap a range of import penalties on Chinese products if they did not make major changes in their economic relationship with the United States.
“President Xi and I want this deal to happen, and it probably will,” Trump wrote. “But if not, remember, I am a Tariff man. When people or countries come in to raid the great wealth of our nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power.”
Three days earlier, after Trump had dinner with China’s leader at a meeting of the Group of 20, the U.S. president said they reached the framework of a deal that would come together in 90 days.
“It’s an incredible deal,” Trump told reporters after the dinner. “It goes down, certainly, if it happens, it goes down as one of the largest deals ever made.”
On Tuesday, Trump said they might need an extension if the 90-day timelines didn’t prove sufficient.
White House National Economic Council Director Larry Kudlow said there wasn’t an actual agreement for China to remove auto tariffs, but that he expected China to eventually do it as a measure of good faith.
White House national security adviser John Bolton, who also attended the Saturday meeting, said the verdict was still out on what China would ultimately do.
“We need to see some major changes in their behavior,” he said, speaking at the same event as Kudlow, a gathering hosted by the Wall Street Journal. “Nobody is under any illusions.”
Kudlow and Trump may not be on the same page. The goal, Kudlow said, was to eliminate all tariffs on any imports, which is a departure from what Trump wrote Tuesday in a Twitter post. The president has not promised to lift all tariffs against Chinese goods.
The reaction of Tuesday’s stock market underscores the oft-used phrase in the 21st century, “Words have consequences.”