U.S. stock index futures declined on Monday as escalating tensions between Washington and Beijing reignited fears of a costly trade war between the world’s two largest economies.

By 05:05 ET (09:05 GMT), Dow Jones Futures were down 220 points, or 0.3%, while S&P 500 Futures fell 35 points, or 0.6%, and Nasdaq 100 Futures dropped 145 points, or 0.7%.

Markets opened June on a cautious note, giving back some of last month’s strong gains. In May, the S&P 500 surged over 6%—its best monthly performance since November 2023—while the Nasdaq Composite jumped more than 9%, and the Dow Jones Industrial Average rose about 4%.

U.S.-China War of Words Heats Up

The selloff followed renewed trade tensions after China hit back at U.S. accusations of violating agreements made during May’s Geneva trade talks.

On Monday, China’s commerce ministry rejected President Trump’s claims that Beijing had breached a bilateral understanding to scale back tariffs, calling the allegations “groundless” and vowing to take “forceful measures” to defend national interests.

The dispute stems from Trump’s Friday comments accusing China of failing to lift restrictions on critical metal exports—key materials for U.S. semiconductor, electronics, and defense industries. He also announced a tariff hike on steel imports from 25% to 50%, effective June 4.

Commerce Secretary Howard Lutnick confirmed the administration’s hardline stance, saying over the weekend that the tariffs were “here to stay,” despite legal pushback. Although a federal trade court blocked much of Trump’s tariff agenda last week, an appeals court quickly reinstated the measures. The case is expected to reach the Supreme Court.

Market Awaits Economic Data and Powell Speech

Investors are closely watching for fresh economic signals, with PMI readings from S&P and the ISM due Monday, alongside several scheduled Federal Reserve speeches, including one from Chair Jerome Powell in Washington, D.C.

Last week’s PCE price index showed a modest cooling in inflation, fueling expectations that the Fed could lower interest rates later this year. Fed Governor Christopher Waller, speaking Monday in South Korea, echoed that sentiment, saying the inflationary impact of tariffs was likely to be temporary and could pave the way for “good news” rate cuts—provided inflation continues to move toward the 2% target and employment remains stable.

Friday’s upcoming nonfarm payrolls report is another key focus, with expectations for the U.S. economy to have added 130,000 jobs in May, down from 177,000 in April.

Chip Stocks Sink, Metals Rally

In corporate news, semiconductor stocks came under pressure after reports that the Trump administration is planning to tighten tech export restrictions to China.

According to Bloomberg, new rules would require U.S. government licenses for transactions involving subsidiaries of already-sanctioned Chinese firms, closing a major loophole used to bypass current restrictions. This weighed on shares of Nvidia (NVDA), Marvell (MRVL), and TSMC (TSM).

Conversely, aluminum and steel stocks rallied following Trump’s tariff announcement. Shares of Cleveland-Cliffs (CLF), Nucor (NUE), and Steel Dynamics (STLD) all gained in premarket trading.

Oil Prices Climb on OPEC+ Output Decision

Crude prices surged Monday after OPEC+ confirmed a July production hike in line with increases seen in the past two months, easing concerns over a steeper output boost.

As of 05:05 ET, Brent crude rose 3.1% to $64.69 per barrel, while WTI crude jumped 3.4% to $62.86.

The group of major producers announced a 411,000 barrels-per-day increase for July—marking the third consecutive month of consistent output growth—after speculation last week about a more aggressive hike aimed at reclaiming market share.