Stocks fell Thursday, giving up strong, early gains, after President Donald Trump announced plans to impose additional tariffs Chinese imports to the U.S., even though the trade talks between the two countries are due to resume September.

Trump said the U.S. would impose 10% tariffs on $300 billion of Chinese goods beginning Sept. 1. In a tweet, the president said trade talks with Beijing are continuing after U.S. officials returned from negotiations in China. The 10% levies will apply to $300 billion of Chinese goods coming into the U.S. It doesn’t include $250 billion of goods already subject to tariffs, the president said.

How are the benchmarks faring?

The Dow Jones Industrial Average DJIA, +1.33% lost 280.85 points, or 1.1%, to 26,583.42, while S&P 500 index SPX, +1.59% fell 26.82 points, or 0.9% to end at 2,953.56. The Nasdaq Composite Index COMP, +2.26% closed down 64.30 points, or 0.8%, at 8,111.12.

The Cboe Volatility Index VIX, -7.47% , a popular gauge of stock-market volatility known by its ticker symbol VIX, jumped to a nearly two-month high Thursday as stocks sold off. The VIX rose more than 13% to trade above 18.0 for the first time since June 4.

The Dow has now fallen for three days in a row to its lowest close since June 27, and is 2.8% below its record high of 27,369 seen on July 15, but remains up 14% year-to-date.

The benchmark S&P 500 index on Thursday saw its lowest close since June 28, and is 2.3% off its record high of 2025.86 on July 26, but remains up 18% year-to-date.

What’s driving the market?

The unexpected move by Trump to ratchet up the trade war with China reversed Thursday morning’s gains in stocks when investors were betting the Federal Reserve would cut interest rates again in September given weakening economic data.

Shares of Caterpillar CAT, +0.53% , Deere DE, +1.26% , Nike NKE, -0.41% , FedEx FDX, +2.43% and Apple AAPL, +3.75% , which are exposed to international trade via China, all dropped sharply.

A draft list of $300 billion worth of targets published by the Trump administration in May included a raft of consumer and technology goods, including Apple’s iPhone, along with toys, footwear and clothing.

‘I think everyone loses in a trade war,” Gary Cohn, Trump’s former top economic adviser, told the BBC in an interview Thursday.

“When you build plant equipment, you’re buying steel, you’re buying aluminum, you’re buying imported products and then we put tariffs on those, so literally the tax incentive we gave you with one hand was taken away with the other hand,” the former Goldman Sachs president said.

Earlier, the adage that “bad news is good news” appeared to hold Thursday, after the Fed disappointed markets with its “insurance rate cut” on Wednesday which pushed up the U.S. dollar overnight, and pressured U.S. Treasury yields lower, along with commodity prices.

The stronger U.S. dollar was seen impacting earnings of companies with international operations and lower U.S. Treasury yields supported stock market valuations.

“The minimal size of the cut, the dissents (by two FOMC members), and Powell’s press conference disappointed markets, and undercut our expectation,” Morgan Stanley economist Ellen Zentner said in a note. “We expect a follow-up cut of 25bp this year, and we judge October as the most likely timing”.

Read:Fed’s hawkish rate cut could be good for the stock market in the long run, analysts say

The prospect of further Fed rate cuts was enhanced also by data showing a further weakening in the U.S. manufacturing sector.

In the U.S., the Institute for Supply Management said its manufacturing index slipped to 51.2% in July, the lowest reading since August 2016. Meanwhile the IHS Markit U.S. manufacturing index fell to its lowest since September 2009 at 50.4%. Of further concern, the employment subindexes showed employment contracting for the first time since June 2013.

Separate data Thursday also showed a weekly climb in jobless claims and a fall in June construction spending.

Friday brings the U.S. Labor Department’s monthly payrolls and unemployment data for markets to consider. Economists surveyed by MarketWatch, on average, look for July nonfarm payrolls to rise 171,000, while the unemployment rate is forecast to decline to 3.6% from 3.7%. Average hourly earnings are forecast to show a 0.2% rise.

Meanwhile investors were also digesting more second quarter corporate earnings reports. Following Thursday morning‘s batch of earnings, just over 71% of S&P 500 companies have now reported. According to FactSet, results from actual earnings blended with estimates for companies still to report, projects earnings will fall 1.4%.

Which stocks are in focus?

Shares of Facebook Inc. FB, +2.12% took a dive Thursday, after The Wall Street Journal reported that the Federal Trade Commission’s antitrust probe of the social media company was looking into acquisitions.

On the earnings front, shares of Dow component Verizon Communications Inc. VZ, +0.33% rose after the telecommunications giant beat Wall Street expectations for second-quarter earnings, but fell short on revenue.

Qualcomm Inc. QCOM, +2.05% fell Thursday after the chip maker provided a downbeat outlook for fourth-quarter results, due in part to the recently instituted export ban to China’s Huawei Technologies Co., late Thursday.

Shares of General Motors Co. GM, -0.37% fell on heavy volume a day after reporting second quarter earnings.

Yum Brands Inc. YUM, +0.01% stock was up after the operator of Taco Bell, Pizza Hut and KFC Restaurants reported declining earnings and revenue year-over-year, though both were better than expected.

Dunkin’ Brands Group Inc. DNKN, +2.03% stock fell after the company reported a second-quarter profit and Dunkin’ same-store sales that beat expectations, while revenue and Baskin-Robbins same-store sales missed.

General Electric GE, +0.99% slumped Thursday a day after announcing earnings that beat expectations but said Chief Financial Officer was stepping down after less than 2 years in the role.

What’s happening in other markets?

Treasury yields fell sharply on the news of new tariffs on Chinese imports. The benchmark 10-year yield TMUBMUSD10Y, 0.657% slid to 1.89%, hitting its lowest level since November 2016. The 2-year rate dell to trade at 1.726%.

Gold prices US:GCZ19 spiked as investors looked for safety in the wake of Trump’s tariff announcement, trading at levels last seen in May 2013. Earlier Thursday gold prices had fallen sharply as the U.S. dollar jumped.

The U.S. dollar gave up Thursday’s earlier gains on the tariff news, with the ICE U.S. Dollar Index DXY, +0.23% slipping to 98.28, after earlier hitting a two-year high.

Crude oil prices fell 7.9% US:CLU19, declining for the first time in six days to levels seen six weeks ago, after the tariff announcement.