Stocks tumbled Tuesday after the Trump administration announced it would respond to China’s trade retaliation with up to $400 billion in new tariffs.

The Dow Jones Industrial Average dropped 400 points, or 1.5 percent, and the S&P 500 fell 1 percent in early trading. The 30-stock Dow index has lost all gains made this year and the Nasdaq fell 1.2 percent.

Stocks pared their losses as trading continued. By midday, the Dow was down just 2600 points, or 1.0 percent. The S&P was off five-tenths of a percentage point, the Nasdaq seven-tenths. The small-cap Russell 2000 was down sixth-tenths.

“Shares of some of the biggest chipmakers fell given their large exposure to China. Qualcomm and Nvidia both dropped at least 1.5 percent. On average, semiconductor and semiconductor equipment companies get 52 percent of their revenue from China, according to a recent report from Morgan Stanley,” CNBC reports.

President Donald Trump on Monday threatened to unleash additional tariffs on Chinese products unless Beijing reverses its “unfair,” trade practices.

“I directed the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent,” President Trump said in a statement. “After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.”

On Tuesday, CNBC “Mad Money” host Jim Cramer dismissed concerns that the U.S. and China are engaged in a trade war.

“Right now, this is not serious,” Cramer said. “I’m waiting for something serious to hit my way.”

Turning his attention to the East, Cramer pointed out that over 1000 Chinese stocks dropped 10 percent since President Trump’s announcement.

“Is that good for the Chinese?” Cramer asked. “Are they sitting there saying, ‘Let’s have a real [trade war], bring it on?’ No. They’re going to have to support a lot of stock. It costs them a fortune.”

The Shanghai exchange dropped 3.8 percent overnight, while the Shenzhen stock market fell 5.77 percent.

Michael Wilson, Morgan Stanley’s Chief U.S. Equity Strategist, says the White House could be encouraged by Chinese stocks falling.

“If I’m President Trump and I’m looking at how mkts are reacting, it’s kind of a win, here.” S&P still up this year, “China stocks are down quite a bit. It’s quite a positive feedback loop. I just don’t expect the WH to back down,” NBC’s Carl Quintanilla, quoting Wilson, tweeted Tuesday.

 

In a briefing with reporters Tuesday morning, White House trade adviser Peter Navarro downplayed the notion that the U.S. was in a “trade war” with China.

“This is a trade dispute, nothing more,” Navarro said.

He added, however, that China has far more to lose than the U.S. in the trade dispute.

“We imported about $500 billion of Chinese exports in 2017 and we exported only $130 billion,” Navarro said. “What the president did yesterday makes it clear that they have much more to lose in this dispute than the U.S.”