The Dow Jones Industrial Average and the S&P 500 erased all of their 2018 gains, which had yielded record highs at the start of the year, as doubts that President Trump can strike a trade deal with China combined Thursday with rising recession risks.

The blue-chip Dow fell 553 points, or 2.3 percent, on Thursday morning, compounding a decline of 800 points on Tuesday, the last trading day before markets closed for the state funeral of former President George H.W. Bush. The broader S&P 500 tumbled 1.9 percent while the tech-heavy Nasdaq slid 1 percent.

Although the White House agreed over the weekend to a 90-day trade truce with Chinese President Xi Jinping to give the two countries time to strike an agreement addressing issues like theft of U.S. intellectual property, Trump doused some of the optimism with a Tuesday promise on Twitter that he's prepared to impose further tariffs if no deal is reached.

Trump's existing duties on some $250 billion of Chinese imports, combined with Beijing's retaliation and simultaneous trade disputes with U.S. allies, have already spurred worry among executives and economists that the White House is undermining the benefits of last year's GOP-led tax cuts.

Further, China has yet to announce any actions following the meeting between Trump and Xi at the G-20 summit in Argentina, including the removal of a 25 percent tariff on U.S. autos, although the president initially said the potential deal was "incredible" and would be one of history's biggest.

"The G-20 truce followed the roadmap that only Trump can solve big problems and is the latest example of his fondness for presidential summits that achieve little but are declared to be epic in nature," said Chris Krueger, an analyst with Cowen Washington Research Group, which has tracked federal policy for the past four decades.

Indeed, wealth-management firm DWS predicted before the Buenos Aires meeting that any cease-fire was unlikely to lead to sustainable progress.

"The U.S.-China dispute is not just about trade balances," Johannes Muller, the company's head of macroeconomic research, said in a report. "It has a geopolitical and strategic dimension. The U.S. fears China's fast ascent on the global economic and political stage."

Another potential complication is the arrest of a top executive at Huawei Technologies, the world's second-largest smartphone manufacturer. Wanzhou Meng, the chief financial officer of the Chinese telecommunications giant and also daughter of billionaire founder Ren Zhengfei, was apprehended in Canada on Saturday at the behest of U.S. authorities amid a probe into whether Huawei violated U.S. sanctions against Iran.

The Chinese Embassy in Canada said it "strongly opposes and strongly protests" the arrest, which "seriously harmed the human rights of the victim."

Prior to the news of the arrest, White House economic adviser Larry Kudlow told a conference of business executives on Tuesday that negotiations with China are "pretty far advanced." But he warned the administration is ready to place tariffs on an additional $267 billion in Chinese products — as well as more than double prior levies on $200 billion in goods to 25 percent — if an agreement doesn't come to fruition.



We are either going to have a REAL DEAL with China, or no deal at all - at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal - either now or into the future.... — Donald J. Trump (@realDonaldTrump) December 5, 2018



In the midst of the market drop on Tuesday, top Trump administration economist Kevin Hassett downplayed any concerns over a possible recession even after the yield curve — a measure of the difference in premiums for long-and-short-term notes — flipped for the first time in more than a decade, indicating a potential looming economic slowdown.

While an inverted yield curve has been a reliable recession indicator, Bank of America economists said Thursday that a downturn isn't likely in 2019.