Tuesday, May 29, was an incredibly volatile day on Wall Street. The Dow Jones Industrial Average dropped more than 392 points. This precipitous drop was caused by two main factors: political issues roiling Italy and the ongoing trade war between the United States and China that has been largely stoked by current US President Donald Trump.
The Dow dropped 1.6 percent or 292 points on Tuesday. In addition, the S&P 500 and Nasdaq both suffered significant losses by the close of trading on Tuesday. There are a number of different factors impacting markets and leading to this new volatility.
The most current threat to the economic order is the fact that Italy will be holding elections soon. The populist party in Italy is seen as hostile to EU projects which could mean massive problems with governing the body. Outside investors are worried about Italian debt and are currently hiking interest rates for the Italian government.
While these issues started in Italy and Europe they spread to the US almost immediately. One major worry of Wall Street is that Italy will eventually leave the European Union. Since Italy is currently the third biggest economy in the EU this would be a catastrophic blow for the continent-wide program. At one point Italy leaving the Euro seemed like a fantasy, but Brexit has financial markets across the globe worried.
Another major source of worry for markets is the fact that the administration of President Donald Trump announced new 25% tariffs on 50+ billion dollars worth of goods coming from China. This goes against statements made by his treasury secretary earlier in the month that the trade war with China was “put on hold”.