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Wall Street stock index futures fell sharply in a volatile session on Sunday evening after U.S. President Donald Trump said he would hike U.S. tariffs on $200 billion (152 billion pounds) worth of Chinese goods this week and soon target hundreds of billions more.

After easing losses for a while, U.S. futures lost more ground and hit a fresh session low after the Wall Street Journal reported that China was considering cancelling a round of U.S. talks set for this week because of Trump’s comments.

Chinese officials were scheduled to meet their U.S. counterparts in Washington on Wednesday after meeting in Beijing last week for a round that Treasury Secretary Steven Mnuchin described as “productive.”

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Investors pulled back from riskier bets on fears the trade battle between the world’s biggest economies was escalating, especially since recent gains in U.S. equities were at least partly due to optimism they would reach a deal.

“I think the president feels China is dragging its feet,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

“He’s trying to pressure China into a deal. It’s a stupid move. The Chinese are going to be thinking this is negotiating in a bad faith way.”

After falling as much as 1.92% on the prospect that China would cancel meetings, S&P futures then steadied slightly.

S&P 500 e-minis were down 54.75 points, or 1.86%, with 175,429 contracts changing hands. Nasdaq 100 e-minis were down 168 points, or 2.14%, in volume of 46,116 contracts and Dow e-minis were down 484 points, or 1.83%, with 26,617 contracts changing hands.

Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut said China’s reaction to Trump’s would be the next big catalyst for investors who may see the President’s comments as a negotiating tactic.

“The next important thing is the reaction from China. Should China cancel the trip that becomes a bigger problem. People came into this weekend expecting there was a good chance we’d have a trade deal next Friday,” said O’Rourke.

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“A deal with China has already been essentially priced in, if not fully. A large portion of the market will give the situation the benefit of the doubt to see what China’s reaction is. If China reacts in a negative way and it turns out to be an escalation the market would see further headwinds.”

The S&P 500 has gained 17.5% so far this year partly due to a decision by the U.S. Federal Reserve to put rate hikes on hold but also due to hopes for a China deal.

“I do think it’s hard for the market to go higher from here without a resolution,” said Rick Meckler, Partner, Cherry Lane Investments, New Vernon, New Jersey.

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