Stocks plunge after China announces retaliatory tariffs

The Dow Jones Industrial Average on Monday dropped over 700 points, or 2.7 percent, before rebounding back into the mid-600s in midday trading after China announced retaliatory tariffs on U.S. goods following President TrumpDonald John TrumpEsper sidesteps question on whether he aligns more with Mattis or Trump Warren embraces Thiel label: 'Good' As tensions escalate, US must intensify pressure on Iran and the IAEA MORE's tariff hikes on Chinese goods last week. 

The S&P 500 also plunged, dipping as much as 77 points, also 2.7 percent, before recovering to a 69-point drop. 

Beijing said it would raise tariffs on a host of American exports to China from 5 and 10 percent to 20 and 25 percent, respectively, come June 1.

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Asian markets also dropped on the news, with the Shanghai Composite down 1.2 percent.

The move comes in response to Trump's decision to raise tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent on Friday, an attempt to put pressure on China amid ongoing trade talks.

Trump tweeted at Chinese President Xi Jinping earlier on Monday, saying that China "will be hurt very badly if you don't make a deal," and accused China of backing away from previous commitments it made in negotiations.

J.P. Morgan's head of Market and Investment Strategy Michael Cembalest said the tariffs could continue to hit company profits, even if the effects on the broader economy are muted.

"While U.S. economic data may not be impacted much by the tariff war, the impact on U.S. industrial and teach earnings could be larger," he said.

He said he put the odds of Trump and China coming to an agreement on a trade deal at 50-50.

Updated at 2:02 p.m.