On Monday, October 29, Wall Street ended a volatile trading session closer to correction territory; the S&P 500 (.INX) tumbled 0.66 percent, down almost ten percent from its September 20 record high. Tech stocks like Amazon, (AMZN  ), Alphabet (GOOGL  ), and Netflix (NFLX  ) fell sharply. The impetus behind the selloff was a Bloomberg report that US President Donald Trump is considering enacting tariffs on all remaining Chinese imports worth $257 billion.

The report disclosed that the Trump administration is ready to announce tariffs on all $505 billion worth of imports from China in December if trade talks next month fail to solve the trade war. In an interview with Fox News, Trump stated: "I think we will make a great deal with China, and it has to be great because they've drained our country." That likely shows that though his administration is willing to negotiate with China, they remain committed to a hawkish hard line.

The trade war escalated when Trump ordered tariffs on a quarter of a billion dollars worth of Chinese goods in September, expanding the list that began in January. The Chinese government has responded to each new tariff announcement swiftly and with equal weight. Some of the American sectors affected by the trade war include steel, industrials, aerospace, and agriculture. Though economists share an unusual consensus that tariffs cause more harm than good, the Trump administration has stated that a trade war is needed to protect American intellectual property and reverse the trade deficit.

Equities have responded negatively to the trade war. The Shanghai Composite (SSE) index entered a bear market earlier this year, and the Dow Jones Industrial Average (DJI) and Nasdaq Composite (IXIC) fell into correction territory in October. Coupled with the Federal Reserve's schedule to raise interest rates until 2021, the trade war is a major headwind for the US stock market, even as tax reform positively affects corporate buybacks and earnings.

Trump and Chinese President Xi Jinping are slated to attend the G20 summit in Buenos Aires, Argentina next month. Although representatives from both countries have been discussing trade issues since the first imposed tariff, Trump is silent on what kind of trade deal he wants to reach with China. With the US midterm elections finishing next week, it is possible that the direction of trade talks could change if the Democratic Party wins control of Congress, as Trump's Republican Party has made no real challenge to his hawkish trade policy. Regardless, the September tariffs on China are scheduled to increase from 10 to 25 percent by year's end.