Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
U.S. Stock futures fell sharply on Sunday night following the latest escalation in US-China trade war by President Donald Trump.
The Dow Jones Industrial Average traded 290 points lower, indicating a drop of 236 points at Monday's open. The S&P 500 and Nasdaq 100 futures pointed to drops around 0.8% for both indexes.
Trump tweeted Friday after a market close that the U.S. will raise tariffs on $ 250 billion worth of Chinese goods to 30% from 25%. Tariffs on another $ 300 billion in Chinese products will also go up to 1
"Sadly, past Administrations have allowed China to get far ahead of the Fair and Balanced Trade that it has become a huge burden on the American Taxpayer," Trump said in his tweets.
Trump later said at the G-7 summit in Biarritz, France he regrets not raising tariffs on China even more, noting he has "second thoughts about everything." " The president added he could declare the trade war a national emergency.
Trump's comments and tweets came after China unveiled new tariffs Friday on $ 75 billion worth of U.S. products, including autos. Trump also ordered on Friday that the U.S.S. companies move their Chinese operations elsewhere, sending U.S. stocks tumbling.
The major indexes all fell more than 2% on Friday, with the Dow Jones Industrial Average losing 623.34 points. Those declines wiped out the weekly gains the averages had built through Thursday's close. After Friday's session, the Dow closed down 1% for the week, while the S&P 500 and Nasdaq Composite closed the week down 1.4% and 1.8%, respectively. Last week also marked the indexes' fourth straight weekly loss, their longest since May.
China and the U.S. have been engaged in a trade war since last year. The economic conflict has dampened economic and corporate earnings growth expectations as investors and companies weigh its impact on the global economy. The U.S. and China are the world's largest economies.
"The ongoing Trade War is redrawing global supply chains, claiming casualties in the process," Julian Emanuel, chief equity and derivatives strategist at BTIG, said in a note. "As persistent headwinds intersect with traditional seasonal softness, recent volatility can be expected to continue in the near term as markets await policy developments."
The trade war is taking place against a backdrop of softening economic growth. Germany's manufacturing sector is contracting while China's economy is growing at its slowest pace in nearly three decades in the second quarter.
bond market has also flashed a recession signal recently. The 10-year Treasury yield has dipped below its 2-year counterpart. This phenomenon is known as the yield-curve inversion. Experts fear it because it has historically preceded recessionary periods.
Fed economic chairman Jerome Powell said Friday the central bank would "act as appropriate". to sustain the current US economic expansion, which is the longest in history. However, Powell failed to clearly signal that another rate cut was imminent in September.
"The problem of facing stocks is not restrictive monetary policy but instead of Trump's destructive trade policy," Adam Crisafulli, executive director at J.P. Morgan said in a note Sunday. "Rates are already very low and low yields coupled with inverted curves are becoming counterproductive to stocks – as a result, central banks are doing about everything they can right now."
Last month, the Fed cut rates by 25 basis points. Market expectations for the September rate cut are also at 100%, according to the CME Group's FedWatch tool.
—CNBC's Michael Bloom and Chris Hayes contributed to this report.
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