Stocks are getting whacked as Trump moves toward an all-out trade war with China

Reuters/Brendan McDermid

A trader reacts as he watches screens on the floor of the New York Stock Exchange in New York

• President Donald Trump threatened an all-out trade war with China by announcing the possibility of tariffs on an additional $200 billion worth of Chinese goods.
• The S&P 500 is set to open lower by about 1%.
• Traders are moving into the safety of the US dollar and Treasurys.

US stocks are set to tumble at the open after President Donald Trump threatened an all-out trade war with China. The S&P 500 is set to open lower by about 1% after heavy overnight selling dropped China's Shanghai Composite (-3.78%) to its lowest level in two years.

"Therefore, today, I directed the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent," Trump said. "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."

Monday's announcement comes just days after Beijing rolled out tariffs on $50 billion worth of US goods in a tit-for-tat response to those implemented by Trump earlier Friday.

"Global sentiment is on the back foot amid signs that neither side will back down, potentially taking global commerce a step closer to an unwelcome trade war," Mike van Dulken, Head of Research at Accendo Markets, wrote in a note Tuesday morning.

Tuesday's stock-market slide has sparked a risk-off trade with money moving into the safety of the US dollar and Treasurys. The US dollar index was higher by 0.44% and at its best level in 11 months. Meanwhile, the 10-year yield was down 4 basis points at 2.88%.

US economic data is limited to housing starts and building permits, which will both be released at 8:30 a.m. ET.

On The earnings front, FedEx and Oracle report after the closing bell.