Dow Jones, S&P 500, stock market end down: China tariffs start

Stocks pared earlier losses but still finished lower on Tuesday as a new round of tariffs went into effect and investors braced for a protracted trade war between the U.S. and China.

A disappointing manufacturing report on Tuesday also reinforced fears that the conflict between the two countries could harm the economy.

The Dow Jones industrial average lost 285 points, or 1.08%, to end at 26,118. The Standard & Poor’s 500 index fell 20 points, or 0.69%, to close at 2,906.

The tech-heavy Nasdaq finished down almost 89 points, or 1.11%, at 7,874. The index is particularly sensitive to swings in trade relations with China, and tariffs have the potential to drive up costs for gadgets and chipmakers.

“The market was forced to accept that the new tariffs that were scheduled to go into effect were not postponed,” said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance. “All of the negative trade and economic news weighed heavily on stocks and the mood is decidedly bearish for this first trading day of the month.”

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New tariffs

On Sunday, the U.S. started imposing a 15% tariff on some Chinese products. China responded by charging tariffs on a list of American goods.

U.S. markets were closed on Monday for Labor Day.

A dismal manufacturing report also stoked fears of an economic slowdown. Factory activity in the U.S. last month fell short of economists’ forecasts and shrank for the first time since August 2016. Businesses are more wary of investing and expanding because of uncertainty surrounding the U.S.-China trade dispute.

The U.S. and China are supposed to meet in September to continue trade negotiations, but investors have grown pessimistic that any resolution will be forthcoming in the near future.

President Donald Trump on Tuesday tweeted he would be “tougher” on China in a second term if trade negotiations lingered on. 

The latest escalation in the lingering trade war has been expected since early August when the U.S. announced plans for the new tariff measures, prompting China to retaliate. The worsening trade situation between the world’s two largest economies dragged the S&P 500 to its second monthly loss of the year in August and dented investors’ confidence in global economic growth.

Contributing: The Associated Press