Trump prepares more tariffs as China retaliates

Dow tumbles more than 500 points as China retaliates on tariffs

The Dow Jones Industrial ended at 25,324.99, down more than 615 points, or 2.4 per cent.

After major indexes in the U.S. plummeted at least 2% on Monday, Chinese and Japanese stocks followed suit.

Tech shares saw the S&P 500 advance by 0.4 percent. The Nasdaq Composite Index tumbled 3.4 per cent, the largest drop since Dec 4.

"The reason we're seeing this recovery is because fundamentals haven't changed", said Kevin Miller, CIO at E-Valuator Funds.

A stumbling block has been US insistence on an enforcement mechanism with penalties to ensure Beijing carries out its commitments. -China trade deal could happen soon and are bracing their portfolios for a more prolonged battle that could hamper global growth.

The euro rose to $1.1236 from $1.1223.

Coca-Cola shares bubbled up 1.33% on Tuesday after analysts at Morgan Stanley turned bullish on the stock, while Ralph Lauren closed 3.69% softer despite posting a first-quarter sales and profits beat.

Sydney and Singapore each dropped 0.9 percent, with Manila and Jakarta both down 1.4 percent.

Researchers calculated the cost of the trade war on families by estimating the total value of the increased price of goods and services after the tariffs are implemented and dividing that by the average number of families of four.

"As China's economic and geopolitical rise butts up against existing United States interests, eleventh hour negotiations and brinkmanship will be a recurring theme which the markets will learn to price in", they said.

North Korea demands return of cargo ship seized by US
In recent weeks, North Korea has resumed testing ballistic missiles after refraining from such launches for a year-and-a-half. US officials have shrugged off the three short-range missile tests, saying the door remains open for talks with the North.

Interested in China? Add China as an interest to stay up to date on the latest China news, video, and analysis from ABC News.

On Monday, China said it would impose higher tariffs on a range of U.S. goods, including frozen vegetables and liquefied natural gas, striking back in its trade war with Washington after Trump warned it not to. The list of targeted goods ranges from TV cameras to tequila, and includes a range of agricultural products.

"Out of the billions of dollars that we're taking (in on tariffs on Chinese imports), a small portion of that will be going to our farmers, because China will be retaliating, probably to a certain extent, against our farmers", Trump said.

While the S&P 500 fell 2.4% on Monday in its biggest daily percentage loss since January 3, U.S. Treasury yields dropped to six-week lows.

"A clear hardening of attitudes, with state media blaring that China 'will fight to the end, ' has stirred concerns of a protracted and widening trade war", Mizuho Bank said in a commentary. But added that the "window to avoid further escalations in US/China tensions is closing fast".

Providing some support for Asian markets were comments from Trump late on Monday that trade talks with China are "going to be very successful".

Trump tweeted, "I say openly to President Xi & all my many friends in China that China will be hurt very badly if you don't make a deal because companies will be forced to leave China for other countries".

Also Monday, Trump said he still was considering whether to go ahead with penalties on the additional $300 billion of Chinese goods.

He also argued that China "buys MUCH less from us that we buy from them, by nearly $500bn, so we are in a fantastic position", adding: "We can make a deal with China tomorrow, before their companies start leaving so as not to lose U.S. business, but the last time we were close they wanted to renegotiate the deal".

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