Investing.com -- China stocks were on the backfoot Monday, even as U.S. markets paired the bulk of their losses after analysts suggested that President Donald Trump's threat to raise tariffs on imported goods from Beijing is more a negotiating ploy than a signal that progress in trade talks had stalled.
Trump's warning that tariffs on $200 billion worth of Chinese goods could more than double to 25% from 10% on Friday sent Chinese stocks tumbling as reports followed that China was considering canceling this week’s trade talks with the U.S. in light of the threat. Chinese officials downplayed the idea.
Smart-phone maker Xioami, networking company ZTE (OTC:ZTCOY), Semiconductor Manufacturing (NYSE:SMI) and JD.Com (NASDAQ:JD) were among the more notable names that fell sharply during the session. ZTE was off more than 9% in U.S. trading, with others falling at least 4%. The Shanghai Composite Index fell 5.6% in Monday trading while Hong Kong's Hang Seng Index fell 2.9%.
The Dow fell 471 points at the open but pared its loss to 215 points, or 0.8%, by 2 p.m. ET. The S&P 500 was off 0.9%.
A slew of Wall Street banks including Citigroup said there's little sign that China is willing to step away from talks after Chinese Foreign Ministry spokesman Geng Shuang told reporters that "China’s team is preparing to go to the United States for the discussions."
"Unless China walks away from the talks (which is not necessarily the same as Vice Premier Liu canceling his trip but rather having no talks at all), we do not expect an escalation of trade tensions into a trade war," Citi said."
The sharp declines come even as UBS analysts and others suggested that the timing of the threat appears to be a negotiation tactic to get the upper hand on China heading into the final round of talks this week.
The abrupt threat arrived after Trump’s top trade negotiator told him that Beijing was backpedalling on a trade deal following a round of talks last week, Bloomberg reported, citing people familiar with the matter.