There has been a rise in the emission of an illegal greenhouse gas that destroys the earth’s ozone layer — and China is responsible for “a substantial fraction” of that increase, according to a new study.
The research published on Wednesday found that China accounted for 40% to 60% of the global increase in trichlorofluoromethane, or CFC-11, emissions between 2014 and 2017. Emissions of the gas came primarily from the Chinese northeastern provinces of Shandong and Hebei, according to the study.
Scientists who conducted the study came from the University of Bristol in the U.K., Kyungpook National University in South Korea, and the Massachusetts Institute of Technology in the U.S. Their research built on earlier studies about the spike in CFC-11 emissions into the atmosphere after 2013 by giving details on the geographic origins of those increases.
The latest study also confirmed media and activist reports that China could be behind the emissions.
“Several considerations suggest that the increase in CFC-11 emissions from eastern mainland China is likely to be the result of new production and use, which is inconsistent with the Montreal Protocol agreement to phase out global chlorofluorocarbon production by 2010,” the scientists wrote in the abstract of the study.
The Montreal Protocol is an agreement signed by all 197 member states of the United Nations — including China — to regulate the production and consumption of chemicals that harm earth’s protective layer. The treaty has led to “a significant reduction” in harmful gases such as CFC-11, which then allowed the damaged ozone layer to heal, according to a report by Canadian newspaper National Post.
Last year, a report by The New York Times found that Chinese factories had ignored the global ban on CFC-11 under the Montreal Protocol. They had continued to make and use the chemical because it’s a cheaper material to produce foam insulation for refrigerators and buildings.
Researchers say that they have pinpointed the major sources of a mysterious recent rise in a dangerous, ozone-destroying chemical.
CFC-11 was primarily used for home insulation but global production was due to be phased out in 2010.
But scientists have seen a big slowdown in the rate of depletion over the past six years.
This new study says this is mostly being caused by new gas production in eastern provinces of China.
CFC-11 is also known as trichlorofluoromethane, and is one of a number of chloroflurocarbon (CFC) chemicals that were initially developed as refrigerants during the 1930s.
However, it took many decades for scientists to discover that when CFCs break down in the atmosphere, they release chlorine atoms that are able to rapidly destroy the ozone layer which protects us from ultraviolet light. A gaping hole in the ozone layer over Antarctica was discovered in the mid 1980s.
The international community agreed the Montreal Protocol in 1987, which banned most of the offending chemicals. Recent research suggests that the hole in the Northern Hemisphere could be fully fixed by the 2030s and Antarctica by the 2060s.
When was the CFC problem discovered?
CFC-11 was the second most abundant CFCs and was initially seen to be declining as expected.
That team reasoned that they were seeing new production of the gas, coming from East Asia. The authors of that paper argued that if the sources of new production weren’t shut down, it could delay the healing of the ozone layer by a decade.
What did investigators find on the ground?
Further detective work in China by the Environmental Investigation Agency in 2018 seemed to indicate that the country was indeed the source. They found that the illegal chemical was used in the majority of the polyurethane insulation produced by firms they contacted.
One seller of CFC-11 estimated that 70% of China’s domestic sales used the illegal gas. The reason was quite simple – CFC-11 is better quality and much cheaper than the alternatives.
So what does this latest study show?
This new paper seems to confirm beyond any reasonable doubt that some 40-60% of the increase in emissions is coming from provinces in eastern China.
Using what are termed “top-down” measurements from air monitoring stations in South Korea and Japan, the researchers were able to show that since 2012 CFC-11 has increased from production sites in eastern China.
They calculated that there was a 110% rise in emissions from these parts of China for the years 2014-2017 compared to the period between 2008-2012.
“This new study is based on spikes in the data on air that comes from China,” lead author Dr Matt Rigby, a reader at the University of Bristol, told BBC Inside Science.
“Using computer simulations of the transport of these gases through the atmosphere we can start to put numbers on emissions from different regions and that’s where we come up with this number of around 7,000 tonnes of extra CFC-11 emissions coming out of China compared to before 2012.
“But from the data, all we just see are the ultimate releases to the atmosphere, we don’t have any information on how that CFC-11 was used or where it was produced, it is entirely possible that it was manufactured in some other region, some other part of China or even some other country and was transported to the place where they are making insulating foams at which point some of it could have been emitted to the atmosphere.”
Where are the rest of the emissions coming from?
The researchers are not sure. It’s possible that the missing emissions are coming from other parts of China, as the monitoring stations just can’t see them. They could also be coming from India, Africa or South America as again there is very little monitoring in these regions.
Does this have implications for climate change?
Yes – the authors say that these CFCs are also very potent greenhouse gases. One tonne of CFC-11 is equivalent to around 5,000 tonnes of CO2.
“If we look at these extra emissions that we’ve identified from eastern China, it equates to about 35 million tonnes of CO2 being emitted into the atmosphere every year, that’s equivalent to about 10% of UK emissions, or similar to the whole of London.”
Will China clampdown on the production?
The Chinese say they have already started to clamp down on production by what they term “rogue manufacturers”. Last November, several suspects were arrested in Henan province, in possession of 30 tonnes of CFC-11.
Clare Perry from the Environmental Investigations Agency (EIA) said that the new findings re-affirmed the need to stamp out production.
“I think with this study, it is beyond doubt that China is the source of these unexpected emissions, and we would hope that China is leaving no stone unturned to discover the source of the CFC-11 production.
“Unless the production of the chemical is shut down it will be near impossible to end the use and emissions in the foam companies.”
The study has been published in the journal Nature.
“Particularly in the wake of the decision to put Huawei on the… entity list, there are concerns that the government of China may decide to retaliate against American companies,” Mr Stratford said.
“These are real concerns, and they increase the risk as people are considering how they should make adjustments to their business models,” he said.
His comments came as the American Chambers of Commerce (AmCham) in China and Shanghai released a survey of its members that found that slightly more than 40% had relocated, or were considering moving production facilities, outside of China because of tariffs.
The group represents more than 900 US companies working in China.
Trade war warning
A recent escalation in the US-China trade conflict, including tariff hikes from both sides, has sparked reaction from industries hit by the higher levies.
US President Donald Trump increased tariffs on $200bn (£157.3bn) worth of Chinese imports into the US from 10% to 25% earlier this month, after Washington and Beijing failed to reach a deal on trade.
China retaliated by announcing plans to raise levies on $60bn of US imports from 1 June.
On Tuesday, some of the world’s biggest footwear firms urged Mr Trump to end the US trade war with China, warning of a “catastrophic” effect on consumers.
In a letter signed by 173 companies, including Nike and Adidas, they said the president’s decision to hike import tariffs to 25% will disproportionately impact the working class.
They also warned that higher levies threaten the future of some businesses.
“It is time to bring this trade war to an end,” the firms urged.
When he raised tariffs earlier this month, Mr Trump told companies that they could reduce costs by shifting production to the US.
The shoemakers and retailers say that they have been moving their sourcing away from China.
But they added: “Footwear is a very capital-intensive industry, with years of planning required to make sourcing decisions, and companies cannot simply move factories to adjust to these changes.”
Ready to talk
Beijing has signalled some willingness to work with Washington to solve their trade dispute.
No discussions have been scheduled since the last round of talks ended on 10 May.
“China remains ready to continue our talks with our American colleagues to reach a conclusion. Our door is still open,” China’s ambassador to the US Cui Tiankai said on Fox News.
The US and Chinese leaders are also set to meet again at the G20 summit in Japan next month.
Google has halted some of its business operations with Huawei, Reuters reported Sunday, in what would be a devasting hit to the Chinese telecommunications company.
Huawei will no longer have access to Android updates and Google technical support beyond what is available through its open source license, according to the news service, which cited a source with knowledge of the matter. The move will also reportedly affect access to apps and services like Gmail on future Huawei phones outside of China, though specifics around the scope of the services ban is still being discussed internally at Google, Reuters said.
“Huawei has made substantial contributions to the development and growth of Android around the world. As one of Android’s key global partners, we have worked closely with their open-source platform to develop an ecosystem that has benefitted both users and the industry,” a Huawei spokesperson told Gizmodo in a statement by email.
“Huawei will continue to provide security updates and after-sales services to all existing Huawei and Honor smartphone and tablet products, covering those that have been sold and that are still in stock globally. We will continue to build a safe and sustainable software ecosystem, in order to provide the best experience for all users globally.”
The U.S. Commerce Department on Wednesday announced that Huawei was added to its list of companies that present potential security threats, which means it will no longer have access to parts produced in the U.S. without prior government approval. Separately, President Donald Trump issued an executive order this week that banned telecommunications firms from using foreign hardware from companies that pose security risks.
“We are complying with the order and reviewing the implications,” a Google spokesperson told Gizmodo in a statement by email.
Huawei has said publicly that it has a “solid track record in cybersecurity” and has denied claims that it poses a security threat. It has further claimed that that retaliation from the U.S. government over apparent national security risks is in actuality an attempt to suppress Huawei’s 5G networks in its international markets.
In a statement about the executive order, White House Press Secretary Sarah Sanders said that Trump “has made it clear that this Administration will do what it takes to keep America safe and prosperous, and to protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services in the United States.”
This article has been updated with comment from Google and Huawei.
WASHINGTON — President Trump escalated his trade war with China on Friday morning, raising tariffs on $200 billion worth of Chinese goods and taking steps to tax nearly all of China’s imports as punishment for what he said was Beijing’s attempt to “renegotiate” a trade deal.
Mr. Trump’s decision to proceed with the tariff increase came after a pivotal round of trade talks in Washington on Thursday night failed to produce an agreement to forestall the higher levies. The White House said talks would resume again on Friday but it remains uncertain whether the two sides can bridge the differences that have arisen over the past week.
In his comments at the White House on Thursday afternoon, Mr. Trump vacillated between threatening China and suggesting a deal could still happen. The president said he had received a “beautiful letter” from President Xi Jinping of China and would probably speak to him by phone, but said he was more than happy to keep hitting Beijing with tariffs.
“I have no idea what’s going to happen,” he said. “They’ll see what they can do, but our alternative is, is an excellent one,” Mr. Trump added, noting that American tariffs on $250 billion worth of Chinese products were bringing “billions” in to the United States government.
In a statement on Friday, China’s Ministry of Commerce said that the government “deeply regrets that it will have to take necessary countermeasures.” It didn’t specify what those countermeasures might be.
“It is hoped that the U.S. and Chinese sides will meet each other halfway and work together” to resolve their dispute, the statement added.
Markets in Asia and Europe rose in Friday trading, suggesting investors still believe the two sides can reach a deal.
The renewed brinkmanship has plunged the world’s two largest economies back into a trade war that had seemed on the cusp of ending. The United States and China were nearing a trade deal that would lift tariffs, open the Chinese market to American companies and strengthen China’s intellectual property protections. But discussions fell apart last weekend, when China called for substantial changes to the negotiating text that both countries had been using as a blueprint for a sweeping trade pact.
Mr. Trump, angered by what he viewed as an act of defiance, responded on Sunday by threatening to raise existing tariffs to 25 percent and impose new ones on an additional $325 billion worth of products. China has said it is prepared to retaliate should those tariffs go into effect.
“We were getting very close to a deal then they started to renegotiate the deal,” Mr. Trump said. “We can’t have that.”
Chinese officials said the decision to come to the United States after Mr. Trump’s tariff threat showed they are serious about trying to reach a resolution. But it is unclear whether China is willing to make the changes that the Trump administration is demanding, including codifying much of the agreement into Chinese law.
“I come here facing pressure,” Liu He, China’s vice premier, said on Thursday in an interview with China Central Television in Washington. “That expresses China’s greatest sincerity. And we want to resolve some of the differences we face honestly, confidently and rationally. I think there is hope.”
An administration official described Mr. Xi’s letter to Mr. Trump as conveying a nice, diplomatic tone but noted that the word “equality” was included, suggesting that China believes the United States is demanding too much and that a trade agreement must be more equitable. Mr. Xi also said he believed that his friendship with Mr. Trump would endure the trade dispute.
Despite the overture, the administration official said that this round of talks had the dour feeling of heading toward a breakup. There is a growing sense of disappointment in Mr. Xi being unable to follow through on things that Mr. Trump’s trade negotiators thought had been addressed.
Mr. Trump’s decision to impose 25 percent tariffs on nearly one-third of all Chinese products is the biggest trade action that Mr. Trump has taken so far. The higher tax hits many consumer products that Americans rely on from Beijing, like seafood, luggage and electronics, raising prices for American companies and their customers across a large portion of sectors.
Stock markets fell Thursday in the United States, but pared some of those losses after Mr. Trump’s comments in the afternoon. The S&P 500 index ended the day down less than 0.5 percent.
Talks resumed at 5 p.m. on Thursday at the offices of the United States trade representative, and Steven Mnuchin, the Treasury secretary, and Robert Lighthizer, Mr. Trump’s top trade negotiator, continued them over a dinner with Mr. Liu and some members of the Chinese delegation.
The new 25 percent rate went into effect at 12:01 a.m. Friday. But the higher tariffs will hit only products that leave China after that time, not those already in transit. That could provide some additional time for the two sides to reach an agreement. Mr. Trump may also be able to rescind the tariffs once a deal is reached, retroactively reversing the higher rates.
“This week is really a challenge if you’ve got boats on the ocean,” said Brian Keare, the field chief information officer at Incorta, who advises companies like Broadcom, Starbucks and Apple on scenario planning amid the uncertainty they face under the Trump administration. “If I’ve got 30 days’ notice, I can make a smarter decision. If I’ve got 72 hours, my hands are more tied.”
China, which has already placed tariffs on nearly all of America’s exports, including agriculture products, has threatened to respond with additional “countermeasures” to Mr. Trump’s latest tariff.
Lyle Benjamin, the president of the Montana Grain Growers Association, said that China had essentially stopped buying American wheat since last year. He was hopeful that a trade truce would change that, but now he expected prices to keep falling.
“It’s highly frustrating, particularly in the agricultural sector, to be collateral damage as we try to achieve these trade goals for other industries,” Mr. Benjamin said. “It’s a tough game right now and it’s tied almost entirely to this trade war.”
But Mr. Trump, already emboldened by a healthy American economy, may be encouraged to keep his trade war going given the monthly trade deficit with China fell in March to its lowest level since 2014 as China slowed its exports to America. The overall United States trade deficit with the world increased 1.5 percent in March to $50 billion, as it continued to import more goods and services than it exported worldwide.
Mr. Trump has seized on that shrinking deficit as evidence that his trade policy is narrowing the trade deficit and boosting growth, as have some of his supporters.
The Trump administration has done projections on the effect of the additional tariffs on the economy and believes that the negative effects will be minimal and pale in comparison to those facing China, an administration official said. The White House will consider taking additional measures to mitigate the effects of any retaliatory measures that China takes against America’s farmers.
“To the president’s credit, the tariffs are working,” said Dan DiMicco, the chairman of the trade lobbying group Coalition for a Prosperous America and a former trade adviser to Mr. Trump during his 2016 campaign. “America’s manufacturers and workers are now seeing gains as manufacturing employment rises and China’s hold on the U.S. market shrinks.”
Mr. Trump’s toughened stance toward China has rattled American businesses, which had been anticipating a trade truce but are now bracing for higher tariffs.
“Clearly, we think a negotiating strategy based on tariffs is the wrong direction,” said David French, the senior vice president of government relations at the National Retail Federation.
Retailers wielded their influence successfully in 2017 when Republicans were considering a tax plan that they believed would have harmed their businesses. But when it comes to trade, Mr. French said that the Trump administration had been intransigent about their tariff concerns. To make its point, the retail association has been holding events featuring businesses that are suffering from tariffs in politically important states like Ohio.
Most business groups agree with Mr. Trump that China engages in unfair trade practices. Among the shared concerns is that China needs to protect American intellectual property and curb subsidies for state-owned enterprises. But those businesses, which depend on China for many of the products they rely on and sell, say the economic pain of tariffs makes them a poor negotiating tool.
“American business continues to have major problems with China’s commercial policies, but we simply must find a way to tackle these that doesn’t turn our most competitive companies into collateral damage,” said Peter Robinson, the chief executive of the United States Council for International Business.
Mr. Robinson suggested that the United States should team up with other trading partners to pressure China to change its ways and work with the World Trade Organization to adjudicate its complaints.
But administration officials have begun to run out of patience with China, which they say reneged on several areas of agreement over the weekend. After a meeting last week in Beijing, Mr. Mnuchin and Mr. Lighthizer were angered to receive a new draft of the agreement from the Chinese with major revisions to provisions they thought had been agreed to. According to people who have been tracking the talks, Chinese officials determined that many of the concessions they were being asked to make would clash with Chinese laws, which the government was not prepared to change.
“The administration has been talking to China for months now about specific things that needed to change in Chinese law,” said Clete Willems, a former member of Mr. Trump’s trade team who left recently to become a partner at the law firm Akin Gump. “The administration was operating under the assumption that some of that would be part of the deal, so to the extent that China is saying that’s no longer possible, that is a pretty big reversal.”
Wall Street analysts have been girding for more volatility this week and many have been adjusting their predictions about the likelihood of an all out trade war.
“The opportunity window for avoiding a trade war is closing fast,” economists at Citigroup wrote in a note to clients.
They warned that an increase in tariffs could begin to push up inflation in the United States and tighten financial conditions. A full-blown trade war is expected to be a drag on global economic growth.
Thus far, most companies have managed to absorb the brunt of the initial batch of China tariffs, keeping inflation at bay, but analysts said that jumping to a rate of 25 percent is impossible to ignore.
“Any maneuverability these companies had been using to blunt the impact of these tariffs is very likely exhausted,” said Henrietta Treyz, the director of economic policy at the investment advisory firm Veda Partners.
Keith Bradsher contributed reporting from Taipei, Taiwan, and Elsie Chen contributed research from Beijing.
Google will temporarily continue to work with Huawei for the next 90 days after being effectively forced to cut business ties with the Chinese tech giant over the weekend in the wake of an American ban.
Google’s action comes after the U.S. Commerce Department granted a 90-day license on Monday for any tech companies that need to work with Huawei to ensure customers have access to apps and security updates. Huawei is still banned from buying hardware from companies like Intel, Broadcom, and Qualcomm, which have all stopped supplying Huawei.
“Keeping phones up to date and secure is in everyone’s best interests and this temporary license allows us to continue to provide software updates and security patches to existing models for the next 90 days,” a Google spokesperson told Gizmodo by email. Huawei did not immediately respond to Gizmodo’s request for comment.
President Donald Trump signed an executive order on May 15 that targeted Huawei, without mentioning it by name, over national security concerns. Many western countries allege that Huawei’s close ties to the Chinese government could allow for spying through Huawei hardware, but the U.S. has never produced evidence for this claim. After Trump’s executive order, the U.S. Commerce Department added Huawei to the so-called Entity List which prohibits companies working in the U.S. from supplying businesses on the list.
The 90-day extension will expire on August 19, and the Commerce Department’s own press release hints that while another extension could be granted after August, if necessary, Google will have to completely cut business ties eventually. Which is to say, this extension isn’t some political play in the broader U.S.-China trade war that’s being used as leverage. This is for keeps.
“The Temporary General License grants operators time to make other arrangements and the Department space to determine the appropriate long term measures for Americans and foreign telecommunications providers that currently rely on Huawei equipment for critical services,” Secretary of Commerce Wilbur Ross said in a press release published on the agency’s website. “In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks.”
Huawei has launched a media offensive around the world in the wake of President Trump’s ban on American businesses working with Huawei, and the Chinese tech giant knows how to invoke America’s own liberal-minded principles against it.
Huawei’s vice president for Europe, Abraham Liu, gave a speech this morning proclaiming that America’s founding fathers would be alarmed by President Trump’s actions. And if the U.S. can attack Huawei’s business, they can attack any international business in the future, according to Liu.
Liu called the U.S. actions “unprecedented” and said that he hoped Huawei’s customers in Europe would make their own independent decisions about whether to use Huawei’s products.
“The founding fathers of the U.S. Constitution would be alarmed when confronted with the actions of the Trump administration,” Liu said from Europe in a speech that was broadcast on the YouTube channel of China’s English-language broadcaster CGTN.
“Huawei is becoming the victim of bullying by the U.S. administration. This is not just an attack against Huawei, it is an attack on the liberal rules-based order and this is dangerous,” said Liu.
China has anywhere from 1 million to 3 million Muslims currently in the country’s concentration camps, making Liu’s comments a bit rich, given the context.
“Now it is happening to Huawei, tomorrow it can happen to any other international company,” said Liu.
Update, 11:57 AM ET: This article has been updated to make it more clear that Google is simply following an order from the U.S. government.
China’s biggest phone manufacturer is running out of friends. Google, Qualcomm and ARM have all reportedly cut ties with Huawei, leaving the company scrambling for partners in the wake of a presidential order. It’s not clear how Huawei will respond to the new blackout, but it’s likely that the company will do everything in its power to reestablish those supply routes. And if the Huawei contests the order in court, as is likely, the resulting legal fight could test the limits of the president’s power over international trade.
Huawei’s recent problems started with a national emergency declared last week by President Trump, which gave the Secretary of Commerce the power to block information technology transactions deemed national security risks. The order, reportedly under consideration for a year, had one obvious target: Huawei, the Chinese telecommunications firm already branded a security risk by United States intelligence. dealing a potentially fatal blow to the Chinese company’s smartphone business.
But the most remarkable part of the order is how far it goes beyond any one company or transaction. Unlike similar actions in the past, Trump’s order gives the Commerce Department broad power to stop any foreign players in a massive industry from doing business with American companies. And given China’s central role in electronics manufacturing, much of the electronics industry could be vulnerable to a similar order.
According to Alan Rozenshtein, a law professor at the University of Minnesota, it’s too early to tell how the executive order will be used beyond Huawei itself. Presidents declare national emergencies for a multitude of reasons, so giving the Commerce Secretary the power to block trade is “not an unreasonable” use of an executive order. But the order could theoretically be used for any number of questionable purposes — to crack down on a company for a matter unrelated to national security, for example.
Huawei has claimed the order was a ploy to punish China as trade negotiations intensify, and if the facts bear that out, they could make the case that enforcement of the order has become unreasonable. Huawei has already sued the Trump administration over a prohibition on government use, and after the executive order, suggested a ban would raise “serious legal issues” — a not-so-veiled suggestion that it could be willing to take legal action again.
The wide scope of the order could also give Huawei room to push back. Instead of stepping in over a single transaction or company acquisition, the executive order effectively blacklists Huawei, as well as any information technology company deemed a potential threat in the future. The order puts every Chinese tech company — and US company working with them — on notice, telegraphing a message that the United States is willing to shut them out of the American market.
Charles Skuba, a professor at Georgetown University’s McDonough School of Business, says there’s little precedent for such a broad order. Usually, if the US sees a potential national security threat in a transaction, it takes a more targeted, narrow approach: he points to actions under the Committee on Foreign Investment in the United States, which is used to examine transactions and is more focused than the powers the executive order gives. If the US was worried about specific technology being sold to Huawei, it could have used the CFIUS process, as the Obama administration did severaltimes in cases of Chinese investment.
But instead of blocking a single deal, or icing out a single company, the Trump administration has gone further. “This is a broader ban that basically says all activities of these Chinese companies — sales of their equipment, acquisitions of equipment from them — basically are subject to this ban,” Skuba says. “It’s much broader.” Whether it’s irresponsibly broad remains to be seen.
Rozenshtein says Huawei could take action on a number of legal fronts. The company might argue in a lawsuit that the administration failed to properly consider the effects of the order — that they were “arbitrary and capricious” in their decision-making. They might also fight on constitutional grounds, arguing that the order is so broad, and gives the president so much power, that it’s unlawful.
Still, in a largely unprecedented situation, it’s tough to predict how well Huawei would fare. Companies have made some challenges to similar orders, like Obama’s 2012 wind farm order, but a judge ultimately dismissed most of the claims in that case, and any challenge may raise thorny questions about executive power. Rozenshtein says he’s skeptical judges would be receptive to the idea. “The courts have upheld incredibly broad use of presidential discretion for decades and decades,” he says.
Even if Huawei loses the legal fight, there may be political repercussions for moving so aggressively. As Huawei is fond of pointing out, the US has produced no public evidence that the company is an active national security threat, and many have raised questions about why providing components to a phone manufacturer poses a threat to US interests. The Washington Post editorial board has already called for more scrutiny of the order, saying the Trump administration “owes the public answers” about the move.
In the meantime, the decision will have wide-ranging repercussions, as American companies ponder who might be added next to the list. “If I’m a US company,” Skuba says, “I look at this national emergency ban, and it says I should be very careful to do business with any companies that have significant interlocking relationships with China.”
May 13 (Reuters) – U.S. stock markets fell more than 2% on Monday after China announced retaliatory tariffs on U.S. goods, heightening fears of a full-blown trade war between the world’s two largest economies that could cripple global economic growth.
At the heart of the selloff were shares in major technology companies including Apple Inc as well as chipmakers, manufacturers and retailers that draw large chunks of their revenue from China.
Apple’s shares fell 5.2%, putting the S&P and the Dow on track for their biggest one-day percentage drop since Jan.3.
The selloff that began with stocks surfing at an all-time high on May 1 has now knocked almost 5 percent off the S&P 500 in less than two weeks.
That still compares favorably with a 20% fall between Oct.3 and Christmas of last year, but it has traders again talking about the end of a decade-long rally that dates back to the aftermath of the 2008 financial crash.
The front part of the U.S. interest rate yield curve, running from three-month U.S. Treasury bills through to 10-year notes, inverted for the second time in less than a week and is seen as a classic signal that a recession is coming.
“The selloff is a reflection that trade talks are in worse shape than people were expecting,” said Willie Delwiche, investment strategist at Baird in Milwaukee.
“Investors are trying to figure out how much of the rally that we had this year was perhaps celebrating prematurely hopes of a trade deal.”
China’s finance ministry said on Monday it planned to impose tariffs ranging from 5% to 25% on 5,140 U.S. products on a target list worth about $60 billion from June 1, striking back after the United States raised duties last week.
Bank of America Merrill analysts said the new Chinese tariffs posed a downside risk of between 1% and 3% for S&P 500 company earnings in 2019.
The S&P 500 and the Nasdaq hit record highs just two weeks ago on hopes of a trade deal and a positive first-quarter earnings season. Last week’s 2.2% fall was the worst for the benchmark index since December.
Tariff-sensitive Boeing Co declined 3.6% and Caterpillar Inc dipped 4.9%.
The Philadelphia chip index was down 4.2%, adding to a 6% decline last week. Qualcomm Inc, Broadcom Inc and Nvidia Corp all fell between 3% and 4.4%.
That left the Dow Jones Industrial Average down 586.00 points, or 2.26%, at 25,356.37 by 11:22 a.m. ET. The S&P 500 fell 65.48 points, or 2.27%, to 2,815.92 and the Nasdaq Composite 241.62 points, or 3.05%, to 7,675.32.
Shares of Uber Technologies Inc dropped 9%, more than doubling their losses since the ride-hailing giant’s poorly received Wall Street debut on Friday.
Banks, which suffer from the fall in long-term rates below short-term funding costs, fell 2.7%. (Reporting by Sruthi Shankar and Amy Caren Daniel in Bengaluru; Editing by Arun Koyyur)