Joanne da Silva and Natalie Sherman
Business reporter, BBC News
Getty Images
The sale in the US stock market attracted steam on Monday, spurring growing concerns about the costs of the trade war against the world’s largest economy.
The S&P 500, which tracks America’s biggest companies, fell by about 2% in early trade, but the Dow Jones fell by 0.9% and the Nasdaq sank over 3.5%.
Falls comes after President Donald Trump asked whether the US economy is facing a recession or prices are rising as a result of tariff moves, instead of a “transition period.”
But Commerce Secretary Howard Lutnick admitted that prices for some products could rise, but argued that there would be no contraction in the US.
New tart tariffs from China targeting some US agricultural products came into effect Monday.
Speaking in an interview that aired Sunday but recorded on Thursday, Trump responded to questions about the recession: “I hate to predict such things. There’s a period of transition because what we’re doing is so big. We’re bringing wealth back to America. That’s a big deal.”
“It’s going to take a little while, but I think it should be great for us,” he added.
Last week, the US imposed a new 25% tariff on imports from Mexico and Canada, but it exempted many of these items two days later.
Trump has also doubled blanket tariffs on goods from China to 20%. In response, Beijing announced a retaliatory tax on the import of some of its agricultural products from the United States.
Starting today, certain US produce that goes to China, including chicken, beef, pork, wheat and soybeans, are facing new tariffs of 10-15%.
Han Shen Lin, China Country Director at consulting firm The Asia Group, told the BBC Today program:
“It said that China has realized that it cannot export to GDP growth in its previous way, so it is now focusing more on the domestic economy.”
See: Trump says tariff exemptions not affected by markets
The US president has accused China, Mexico and Canada of not enough to end the flow of illegal drugs and immigration to the United States. The three countries refused to file charges.
Stocks on Wall Street have fallen since Trump sparked a trade war with top US trading partners.
Investors fear that tariffs will lead to higher prices, ultimately leading to the growth of the world’s largest economy.
Speaking on NBC on Sunday, Lutnick said, “Foreign products could be a little more expensive, but American products would be cheaper.”
But when asked if the US economy could face a recession, Latnic added: “Absolutely… there will be no recession in America.”
Frank Rabin, a former US Commerce Department employee, told the BBC he believes the trade war is unlikely to escalate out of control.
The tariffs ultimately “fade out a bit,” but he said it’s still a “extra burden on the US economy.”
Rachel Winter, investment manager at Killik & Co, told the Today program he thought the US likely had a higher period of inflation.
“I think tariffs are inflation in theory, and the level of tariffs Trump is imposing definitely has to cause inflation somewhere,” she said.
