The Dow suddenly plunged during late-morning trading on Friday after Bloomberg published a report exposing that the Trump administration is debating a new policy that would ramp up pressure on the Chinese economy as the two countries prepare to return to the negotiating table.
The policy, if enacted, would limit American investors’ access to the Chinese market, threatening the “goodwill” Beijing and Washington had exchanged in recent weeks.
Dow Recoils as White House Mulls Trade War Escalations
The Dow Jones Industrial Average and its fellow Wall Street stock indices quickly erased their daily gains in response to the report.
The Dow, which had plowed toward a triple-digit rally to close the week in positive territory, briefly plunged into decline and now remains little changed for the day. At last check, the DJIA had gained 20.74 points or 0.08% to trade at 26,911.86.
Bloomberg: Trump Admin Weighs Crippling Limits on Chinese Investment
The US stock market had enjoyed a relatively bullish morning session, at least until Bloomberg revealed a Trump administration plan to enhance pressure on a Chinese economy already rattled by sluggish growth and US tariffs.
According to the report, White House officials are currently discussing strategies to limit US investment in China, which recently began removing limits on foreign investment to bolster its ailing market.
At the federal level, the government could instruct pension funds to limit their exposure to the Chinese market.
More concerning for investors is that Trump officials have also discussed delisting Chinese companies like Alibaba and Baidu from US stock exchanges, which could dramatically affect index fund portfolios.
Baidu and JD.com, for example, both feature prominently in the Nasdaq 100, though the real chaos will occur in international equity funds.
The White House has not decided whether to pursue these policies, but the fact that they are deliberating them at all – with Trump’s approval, the full report adds – could quash rising optimism that the US and China will emerge from next month’s trade talks with a tariff truce in hand.
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