And months ahead at the center of the drama, of course, today the currency clash. President trump accusing china of currency manipulation as china lets the yuan fall we have got the details of the punch and counterpunch plus, the consumer crush the names the trade war could hit hardest, as well as which ones could actually benefit from escalating tension power lunch starts right now lows of the day on the dow right now, 781 points. The next two hours will be big trade headlines sinking stocks today. Kayla tausche covering all of the trade angles for us, as she has for months now but lets begin with bob pisani at the New York Stock Exchange hey, bob and tyler, todays declines are very broad based everything, except maybe gold and utilities. Lets take a look, down 1. 5 to 3. 5 Technology Stocks down, bank stocks down. Consumer discretionary down, energy, industrials, all down about the same however, even Consumer Staples are not faring that well look at the walmarts of the world, costcos of the world, even kroger, i have been pointing out kroger gets 100 of its revenue in the United States even kroger is essentially down about 2 that tells you something it tells you that some investors arent simply taking down exposure to the market overall, which makes sense given how pricey stocks were going into the month of august. Right now, this looks a little like early may i have been saying this all day. Trade talks broke down in early may. The u. S. Hiked china tariffs, the markets were down big time oil down 16 , the vix was over 20 in early may. Thats exactly whats happening today in early may, the vix is at 23 right now. Bulls say were one tweet away from a rally going back up again. Maybe. The problem is that the positions are much firmer now amongst the two countries than they were three months ago this is not may. Now weve got currency issues coming into this there may be other retaliatory measures outside the tariffs that are even more serious that really is what the markets are worried about. This could escalate. Theres some technical damage being done the russell 2,000 and the dow transports are below their 200day moving arg the same level for the s p 500, were not there yet, 2790 is the 200day moving average, and thats about 50 points away. Back to you. As we sit here, basically at session lows bob, thank you china retaliating against the u. S. For that latest round of tariffs. Kayla tausche does have the latest from washington kayla. Kelly, state media reports say china will cease purchasing Agricultural Products from u. S. Farmers as retaliation for President Trumps escalating the trade war to include new tariffs on the remaining 300 billion in imports. The headlines via shen waw news agency hit in the middle of the night in china, perhaps to make certain that President Trump got the news here in the u. S in a series of tweets earlier this afternoon, trump called chinas currency manipulation historic and said china has always used currency to steal our business and factories, hurt jobs, depress wages, and more. Earlier today, he called on the Federal Reserve to respond in a text announan outside ally described the move as a real miscalculation by trump. Which is notable because often advisers suggest its part of a grand plan this time, theyre suggesting it might be hard to put the genie back in the bottle Kayla Tausche in washington following the developments of the day for us for more on the fallout as the trade war with china esclatsz, the only way you can put it, lets bring in stefen sealing, a former undersecretary of commerce for trade, also managing partner with bridgepark, and meredith sumpter. Welcome to both of you stefen, you heard ambassador baucus say just moments ago with respect to the tiff between president xi and President Trump that xi has more tools than he does true he certainly has a lot of tools, arrows in his quiver. He has patience that the ambassador mentioned he also has the state control of his media. And he has, frankly, a government where he does not need to run for reelection. And as a result of that, you know, he has time in many respects on his side, tyler. Also if he tells the central bank, the bank of china, to do something, theyre going to do it make no mistake, the pboc is reacting and responding based on direction from senior officials, including president xi meredith, have currencies now become weaponized . Not to the extent that investors are speculating. Actually, china has been manipulated its currency but to prop it up in the hopes a trade deal could be secured this year. I think the real story here is the loss of confidence in beijing that theyre going to get any kind of trade deal with President Trump that beijing could live with. So what they have effectively done, then, meredith, to play it out so that i understand it is they have backed away from supporting an artificially holding the currency stronger than it would otherwise be and have now let it decline to below seven. Let it decline to below seven, and in a carefully managed way. This is beijing here, but tongue in cheek, we had chinese analysts overnight commenting having this new psychological threshold be broken shows the huan is a more market reflective currency than what it had been previously so the key here, and even the state news agency is calling this breaking point the throwing off of shackles that eventually would have needed to be broken as well. So china, lets be clear, china is not interested in a freefall of its currency at all but what they are saying is theyre allowing them to reflect the real market pressures, the external headwinds that this trade confrontation has brought to bear. Stefen, its interesting to me that this is all perceived as a blow to the u. S. This currency move when in reality, as Larry Lindsey kind of described, its a blow to the chinese. It offsets the impact of the u. S. Consumer of any kind of tariff it means they have less purchasing power on the world stage. How is this somehow winning against us other than knowing that its going to make the president unhappy . Not only blunts, to your point, the impact of the tariffs, but it also has real longterm costs for china and not just around potential capital flight their corporations have huge dollar denominated debt that just became more expensive they purchase a lot of commodities like oil, which are dollar denominated as a result of that, all of those purchases now for china just became more expensive but to merediths point, lets not overreact to the devaluation. I think it is more symbolic still at this point than it is actually going to have a profound economic and Financial Impact but what i think it does mean is china is now preparing for a longer battle as opposed to having some near term resolution and some long term sustainable outcome in our trade dispute it just seems interesting to me theyre choosing a way that while its headline grabbing may be shooting themselves in the foot when they could do other things like say dont buy starbucks. If they really wanted to hurt the u. S. , ight i presume a lot of those, you see even with the reports on how the chinese are supporting huawei theres a real sense of patriotic duty in china to support their companies and their economy. And so as a result of that, i do think we see gird for a longer battle than the market might have expected in the not too recent past. And thats what pricing that all now in and thats already in trade flows. The Commerce Department came out with in the First Six Months of this year, trade with china is down 14 thats both our exports and our imports. As businesses are now saying this is going to be too volatile, too uncertain, and were going to decouple our supply chain with china. Thats going to have an impact on prices for consumers but fundamentally, its going to cost the chinese economy and lead to lower chinese employment, which is the one thing their government is primarily focused on meredith, there was a lot in that answer, the multiple answers there. I want you to pick up on it, particularly the idea that china may be hurting its own interests in that theres going to be capital flight debt thats going to now become more Expensive Oil thats going to become more expensive to buy in their currency among other things, is this then what and the economy is slowing. Is this then what the president means, our president means, when he says china is paying these tariffs . China is taking a longterm view of what this economic confrontation is going to mean and its preparing for a longterm fight. So when you look at the risks that markets are pricing in today, our view is that those markets, that market risk is really just a few of are we going to get a deal this year or not. The real market risk here is have markets and our investors realizing were on the precipice of what is likely to be a multiyear economic confrontation with trade, investment, export controls between the worlds two largest economies. So some of the declines we have seen today, our sense is really its just a start. Some of the longer term structural risks still need to be baked in. We didnt even get to the question of whats going on in hong kong and the Security Issues there when i hear, meredith, and ill wrap it with this, stefen, you, too, when i hear several guests over our last week say confidently that both sides have too much to gain and too much to lose for there not to be a deal, whats your reaction to that is that being naive to say that . Meredith my sense is that for xi jinping, he is not comfortable with the deal that has been floated by washington such far as such, he is not going to be making concessions to this stateled economic order that will be enough to appease President Trump. So the deal is off for 2019, almost certainly we have a 65 probability that President Trump will move forward with those tariffs on september 1st, which will harden both sides our take would be much more bearish than what theyre saying lets get your thought on that when people say there is too much at stake here, common sense is going to prevail, theyre going to get a deal. I think its not the right question the question is what is the deal so if the deal is buying soybeans if the deal is around intellectual property protections, we may in fact get to some deal sooner rather than later. Im not disputing merediths overall timeframe, but if the deal fundamentally addresses the state support of the chinese economy, i think its going to be a multi, multiyear process, and maybe a generational process. So what we might get to is incrementally helpful deals that help the u. S. Economy and help u. S. Businesses compete fairly with china but were not going to have a panacea anytime soon thank you very much appreciate it. Lets check out the markets now as the dow has shed about 1500 points since the fed Decision Just five days ago. Dom chu is here with the latest moves as were down 760. This is now near just above the worst levels of the day. Lets take a look at the worst performing stocks now. They range here, but the reason why these five stocks are up here right now is because these are the five biggest point detractors in the dow right now. So as were down 760 points, boeing, by the way, is shedding about 78 points roughly from the dow because of that. Apple is down about 71 points, so down 770 overall, down 70 just from apple and 78 from boeing visa is shaving about 57 points off the overall dow, goldman sa sacks about 54 points. So a lot of that move is just boeing, apple, visa, goldman, and home depot there are out performers but none are positive. Verizon is only off about a quarter. Cocacola is shaving about three points off and pfizer, about seven. Theyre outperformers, but just to put it in perspective, the reason were seeing such outsized moves, apple and boeing a large part of the dow negativity story today thank you just how much more pain is there in store for investors lets bring in joe duran, the ceo and Founding Partner of United Capital brent schuette is chief investment strategist, and michael farr, a cnbc contributor and president and ceo of farr, miller, and washington michael, ill start with you, as you just heard, theres a lot of pessimism with our guests over whether we get to some big banner deal with china just given the way thicks have turned in the past week, should the market be pricing in and maybe its pricing in today, 25 tariffs on the 300 billion worth of chinese goods i think the market is clearly telling you its unhappy today, and it certainly doesnt like yesterdays valuations its already working on its own repricing, i think to try to figure out how much future volatility will give it some pricing comfort. Were going to go to a price now where we think things are probably a little more reasonably valued. Overall, the year is still pretty good, but yes, this is a very tough sort of a day for markets to see that, geez, we were waiting for this fed rate hike that gave us some encouragement. The president came out with tariffs quickly afterwards, and now we have the same level of instability again, and its rocking investors, and theyre voting with their wallets. Joe, what about those who say maybe its no accident that were down 1500 points since the fed meeting . The cause and effect here, how much would you attribute to the rate cut, how much to the president s tariffs and whats the interplay between the two . Very little to do with the fed, honestly. This market for the last several months has been all about the tariffs. And the reality is that the tenyear bond, the fed is not playing with the tenyear bond, and were at 1. 7 something, when we were in the 2s just a week ago that is not the fed. Thats the impact of the Global Economy. You have germany down below half a percent. Minus half a percent, and we dont know how long that might go what is happening is the whole world is repricing risk. A flight to quality, and you have a lot of silence, not a lot of talk about whats happening in iran, with another tanker taken. Whats happening in not just tarifffes but hong kong, brexit occurring in a couple months youre going to see a yield really safety, not even about yield. How do i make sure i survive we had a pretty good year so far. I think youre going to see quite a lot of volatility. Again, not necessarily anything negative, but we might see another 3 to 7 decline, maybe a 5 to 10 decline. Maybe even a couple before the end of the year. You need to be prepared for that brent, let me turn to you joe picked up on the decline in the tenyear note. Which has inverted the yield curve. I dont mean to wonk out here, but inevitably we must and get in touch with our inner nerds. What is that telling you about not only the economy in the United States and around the globe but what it could say about the future for stock prices we know that bond prices are where they are, high, and rising because people are playing a safety trade here. But what is the implication of that inverted yield curve where the shorter dated maturities are paying more than longer dated ones well, i think thats the big question in the past, its determined that when that happenhappens, recession occurred and ensues. This time its different a lot of that has to do with the tariff impacts, and theres slowing global growth, but if the tariff impacts come off, and this is the important part because we do think and disagree somewhat with the prior guest, we think the president is malleable, so the comment is that the sides have firmed im not for sure the president has firmed on his desired outcome. I think he wants a good deal and hes not willing to risk recession to get a great deal. And so the falling market may cause him to backtrack like it has in the past, and thats one thing people are looking past and overestimating just how idealistic this president is, and perhaps they need to kind of soften that a bit because i do think the falling market has one Silver Lining. I think it potentially causes the president to pull back on his tariff threats we havent seen that yet. Im not saying hes going to react minute by minute to the tape he has twitter and could easily, whether its him, whether its an adviser, you know, its been pretty quiet, and remember, he started this going back to those tweets last week, saying that china was not following through on its promises. Yeah, i guess you leaked on friday, i believe, that a senior official said that the president would possibly consider not putting the tariffs on september 1st if china did what they were supposed to do so i do think there is still malleability i guess the question is where does that come in, and perhaps a couple more days like today would give the president attention again. While i know hes hardened right now, i dont think thats necessarily that hard in the future if the market continues to fall, and the Fourth Quarter got us closer to a deal, and perhaps a couple more days like today would get us back in focus again. Michael, woe talk about coming into a day like today with 14 trillion worth of yields negative globally, what do we come out of it looking at, and how much are we how many distortions are we seeing created when the tenyear is down to almost 1. 7 . You know, if you have people speculating about currency intervention, which takes the form of bond buying, are we going to retest the 2016 lows . Are we going sub1. 4 in the tenyear where does it end . If the trend is your friend, you have to start looking at those levels those would be the levels of support or resistance depending on how youre looking at yields versus prices. You know, every one of these sort of market moments in the past when the president has shocked us either by his tariffs on mexico and everything coming out of mexico, has been fairly short lived. Maybe this one will be maybe it will last longer. But most of those have presented buying opportunities you know, at the end of june, we were at 17. 7 times earnings for the s p 500. Were now in the 16. 5 times range. Things are becoming more reasonably priced. On your program on this show before, when we have been talking about more value oriented stocks, stocks with more solid balance sheets, that kind of boring can be beautiful. And boring is never fun on a day like today but its a lot more beautiful than a lot of the high flying nasdaq stocks. So this is a time when