Stocks stumbled for a second day on Tuesday, as White House advisers agreed new tariffs would be imposed on Friday. Shares of Deere and Caterpillar, large agriculture manufacturing companies with ties to the Quad-Cities and strong markets in China, dropped.
The S&P 500 had its biggest loss since late March. It fell 48 points, or 1.7%, to 2,884.
The Dow on Tuesday fell 473 points, or 1.8%, to 25,965. The Nasdaq fell 159 points, or 2%, to 7,963.
Chinese officials are expected to be in Washington on Thursday for the 11th round of talks aimed at negotiating a trade deal. Investors and analysts are questioning the consequences of the talks following Trump's threat to raise tariffs from 10 to 25 percent on $200 billion of Chinese goods.
Mark Grywacheski, an investment adviser with Quad-Cities Investment Group, argued Trump's threat is mostly a negotiation tactic. He pointed to an identical threat Trump made ahead of the March 1 deadline for an increase in tariffs on Chinese imports. Trump decided to delay the raise in tariffs.
"Trump delayed that under expectations that this new trade agreement would be forthcoming," he said. "But, President Trump feels things aren't moving fast enough, so he's making the same threat for a 25 percent tariff. More or less, I think it's a shot across the bow. This is just a reflection Trump wants to wrap this up sooner rather than later."
In a tweet, Trump wrote, "The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!"
The Trump administration had suggested the trade talks were making progress over the past several weeks. Grywacheski said financial markets have improved since the beginning of the year, with investors banking on a resolution.
Investors buying stocks pushed the S&P and Nasdaq to all-time highs last week. All of the major indexes still have double-digit gains for the year.
But on Sunday, Trump threatened to raise the tariffs once again.
U.S. officials want a trade deal to be strictly enforced, arguing China has failed to keep up with its promises in the past. It remains unclear what will happen to U.S. tariffs on Chinese imports, as the U.S. continues to use them as leverage.
In the meantime in Iowa, farmers and companies in the agriculture and manufacturing industries are still hurting from unresolved negotiations. Soybean and corn prices have plummeted.