Stocks slid on Tuesday, falling for a second straight day, after comments from President Trump and his advisers dashed hopes that a trade deal between China and the United States could be reached this week.
The S&P 500 fell 1.7 percent, one of its sharpest single-day declines this year with heavy losses in shares of companies most exposed to trade.
Late Monday, the trade representative, Robert Lighthizer, and Treasury Secretary Steven Mnuchin said that new tariffs would be imposed on imports from China starting on Friday. They cited what they saw as Chinese backpedaling on commitments.
The comments came just a day after the president tweeted about the new tariffs and reinforced concerns that the trade talks, which are set to resume Thursday, had hit a serious snag. The S&P 500 had dropped half a percent on Monday.
The two-day drop is a sharp turn for a market that hit a record high just last month. Through end of April, the S&P 500 was up 17.5 percent, powered by the Federal Reserve’s abrupt pivot away from its previous focus on raising interest rates.
Some now think those gains could be emboldening the administration to ratchet up its trade dispute with China. And that has them preparing for another period of market volatility in the coming weeks.
“He’s never had better cards dealt to him to push China hard than right now,” said Michael Purves, chief global strategist at brokerage firm Weeden & Company. “There’s clearly the risk that he’s going to push this into Friday and beyond.”
The talks are still expected to be held as planned. China’s Commerce Ministry said on Tuesday that Liu He, the vice premier and one of the country’s leading economic policymakers, would join the Chinese delegation. Mr. Liu is a close adviser and confidant of President Xi Jinping, China’s top leader, and his participation could improve the chances of striking a deal.
Still, the statements from Mr. Lighthizer and Mr. Mnuchin were taken as a sign that the administration was gearing up for another period of contentious negotiations that could whipsaw markets.
Among trade-sensitive stocks, shares of Caterpillar and Deere, industrial equipment makers with large markets in China, tumbled. Boeing, one of the United States’ large exporters, dropped more than 4 percent.
Semiconductor companies, which are heavily reliant on production networks centered in Asia, and tech shares also dropped sharply.