China, EU to form group to modernise global trade rules

Beijing hopes to dominate ten high-tech sectors

Also Monday, Wisconsin's Harley-Davidson tumbled more than 6% after saying it would move some production out of the United States amid retaliatory tariffs the company said would bring about a "tremendous cost increase".

"We expect growth in the USA economy to slow next year, but if trade tensions escalate, the slowdown could happen sooner and be more severe, putting the FAANGs under pressure", Ingvild Borgen Gjerde, a markets economist at Capital Economics, said in a note. The broader S&P 500 closed at 2717.07, down 37.81 points or 1.4 per cent, marking its biggest one-day decline since early April. The index is again slightly under water for the year.

Late last month, Trump infuriated USA allies - from the European Union to Canada and Mexico - by imposing tariffs of 25 percent on imported steel and 10 percent on aluminum.

The US Treasury Department is drafting curbs that would block firms with at least 25 per cent Chinese ownership from buying US companies with 'industrially significant technology, ' a government official briefed on the matter said on Sunday.

The recent imposition of import tariffs by the USA, and counter-measures by other countries, are also starting to affect global production and supply chains.

Mnuchin's tweet came amid a difference of opinion among top Trump administration officials on how aggressive an approach should be taken in challenging China's trade practices.

"The trade war keeps opening up on new fronts", Sal Guatieri, an economist at BMO Nesbitt Burns, said in a note.

Navarro insisted that the administration's trade policy is "bullish" for US stocks and said that the market was overreacting to reports that the administration would restrict foreign investment by China and other countries.

Harley-Davidson, the dominant player in the USA motorcycle market said on Monday it would not pass on the cost of European Union tariffs to customers and instead focus on shifting some US production to other countries.

Auto manufacturer Daimler AG has warned that tariffs will lower its profits, illustrating the financial impact of the simmering conflict.

Investors aren't so sure. Caterpillar stock lost 3.7 percent and Boeing fell 7.7 percent on Monday.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 25, 2018. Shares of General Electric, which will leave the Dow Jones industrial average on Tuesday, fell as much as 1.5% after the company said it would sell its distributed-power business. But many investors read it as foreshadowing a possible broadening of USA investment restrictions.

Treasury yields also slipped following the report, with the 10-year down 2.3 basis points to 2.877%.

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