All 3 major indices took a dip Friday as President Trump threatened more tariffs on China in retaliation for the COVID-19 outbreak and Beijing’s handling of information in the early stages of the pandemic.
Trump has been quite candid about his concerns regarding China’s role in the COVID-19 pandemic’s origins and in statements made Thursday indicated that making sure there are appropriate consequences for China going forward, saying that recent events will overshadow existing trade agreements.
“We signed a trade deal where they’re supposed to buy, and they’ve been buying a lot, actually. But that now becomes secondary to what took place with the virus,” Trump told reporters. “The virus situation is just not acceptable.”
Exactly what these new measures look like is anybody’s guess at this time. Sources with close knowledge of internal discussions indicated to the Washington Post that canceling a portion of the U.S.’s substantial debt with China was being looked at as a possible punishment for China’s less-than-forthcoming handling of information regarding the pandemic and it’s origin.
The White House is denying this. In a statement Friday White House economic adviser Larry Kudlow said, “The full faith and credit of U.S. debt obligations is sacrosanct. Period. Full stop.”
Trump himself has indicated that the U.S. not meeting it’s debt obligations was not his first choice of strategy, instead favoring new tariffs. When asked if stopping payment to China was an option, Trump said, “Well, I can do it differently. I can do the same thing, but even for more money, just by putting on tariffs. So, I don’t have to do that.”
On Friday the S&P 500 dropped as much as 2%. The 10-year Treasury yield fell to 0.62% from 0.64% on the news of the possibility of more tariffs.