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Stocks close down as U.S., China trade fire on tariffs

New tariffs on Chinese goods
New tariffs on Chinese goods 08:42

Stocks closed in the red on Friday as the Trump administration moved to impose tariffs on China, Beijing fired back with and a looming OPEC meeting weighed on the energy sector. 

The Dow initially fell more than 200 points before gaining in afternoon trading to close down 84 points at 25,090. The S&P 500 was essentially flat.

Global industrials Boeing and Caterpillar fell 1.3 percent and 2 percent, respectively. Oil companies also traded lower amid the geopolitical tensions, including the upcoming OPEC meeting next week to discuss production. Anadarko Petroleum, Devon Energy and ConocoPhillips each closed down more than 3 percent. 

The U.S. Trade Representative on Friday released a list of nearly 900 Chinese imports that will face a 25 percent tariff starting July 6. Another 234 Chinese goods could also face an identical penalty after further USTR review.

China responded to U.S. tariffs announced Friday morning with a promise to impose reciprocal levies on a range of American products, including agricultural products,  cars and seafood.

Some 545 U.S. goods worth $50 billion will be subject to 25 percent tariffs, the Wall Street Journal reported, citing China's state council. Tariffs on $34 billion of goods will take effect from July 6, according to Reuters. Other tariffs will be announced at a later date. 

"There remains a substantial risk of escalation and a more prolonged dispute that lasts through the summer and into the fall," analysts with Eurasia Group, a political risk adviser, said in a research note. 

U.S. officials say the tariff hike targets goods that might benefit from Chinese theft of technology or pressure on foreign companies to hand it over in exchange for market access.

"Ultimately a negotiated solution is likely," said Shane Oliver, head of investment strategy at AMP Capital. Even though China and the U.S. probably want to negotiate, "the risks are high and the tariffs could well be implemented before the issue is resolved."

The immediate impact of tariffs on U.S. growth is expected to be relatively small, but economists warn a prolonged trade war could damage business investment and consumer confidence. 

"[I]ndividual US sectors ranging from agriculture to aerospace are vulnerable to retaliation by China," Madhavi Bokil, a senior credit officer at Moody's, said in a client note. "Thus, the growth and inflation impact on the U.S. economy will depend in large part on China's response, as well as the impact trade tensions have on global growth."

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