Wall Street set to slide as China-U.S. trade spat escalates

Wall Street was set to open sharply lower on Tuesday as President Donald Trump`s latest threat to impose duties on additional Chinese goods heightened concerns that tit-for-tat tariffs could spiral into a trade war. U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods and Beijing warned it would fight back with "qualitative" and "quantitative" measures.

At 8:56 a.m. ET, Dow e-minis were down 343 points, or 1.37 percent. S&P 500 e-minis were down 27.75 points, or 1 percent and Nasdaq 100 e-minis were down 90.75 points, or 1.25 percent. Futures implied that the Dow Jones Industrial Average was set to erase all its year-to-date gains. Twenty-nine of the bluechip index`s 30 components were in the red premarket.

The U.S. President`s unexpectedly swift and sharp move, which also sent global financial markets skidding, marks an escalation of the two countries` moves last Friday to slap tariffs on $50 billion of each other`s goods.

"From a negotiation perspective, it`s a powerful tool. From a market perspective, it leads to increased uncertainty. In the near-term, we would expect to see volatility in markets as they attempt to price in the net impact of tariffs," said Michael Olivia, a financial planner with Westpac Wealth Partners.

The CBOE Volatility Index, the most widely followed barometer of expected near-term volatility in the S&P 500, hit a more than two week high at 14.67, before easing to 14.38.

Shares of Boeing, which has acted as a proxy for trade war tensions with China as it is the single largest U.S. exporter to the country, fell 2 percent premarket. Construction equipment maker Caterpillar dropped 1.6 percent.

Chipmakers, which depend on China for a large portion of their revenue, also slipped. Intel, Broadcom, Qualcomm and AMD were down between 1.4 percent to 1.8 percent.

U.S.-listed shares of Chinese companies tumbled, with e-commerce giant Alibaba down 2.3 percent and JD.com off 4.04 percent.

The Russell e-minis were down 9.70 points, or 0.15 percent.

"Everybody will have their eyes on the Russell 2000 because people begin to think small-cap U.S. companies, that aren`t subject to the winds of international trade negotiations, is the right place to hide out," said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee.

Yields on the benchmark U.S. Treasury note fell to more than two week low as demand for safe U.S. debt climbed.