The record bull run of the past month flamed out, with the Dow Jones industrial average declining 268 points, or .95%, to close at 27,783. The Standard & Poor’s 500 index dropped 27 points, or .86%, to close at 3113. The tech-laden Nasdaq composite was hit particularly hard, finishing at 8,567, a 97-point drop of 1.1%.

“All this trade friction is weighing on the manufacturing sector, reminding us that protectionism is not a victimless crime,” said Kristina Hooper, chief global market strategist at Invesco.

Nine of 11 stock market sectors declined on Monday, with industrials, information technology and real estate leading the slide. All but seven of the Dow 30 blue chips finished in negative territory, with Boeing, American Express and United Technologies the biggest drags.

President Trump threw another curve ball into the trade picture Monday when he announced on Twitter that he would reinstate steel and aluminum tariffs on Brazil and Argentina. He accused the two nations of weakening their currencies to gain competitive advantage against the U.S., an oft-repeated rebuke that he’s cited in his ongoing push for lower or even negative interest rates from the Federal Reserve.

“Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers,” Trump said in Monday morning tweet. He then pivoted to the Federal Reserve, saying the central bank should “act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies. This makes it very hard for our [manufacturers] & farmers to fairly export their goods. Lower Rates & Loosen – Fed!”

Stock futures had been trending up early Monday. Two surveys over the weekend showed that China’s manufacturing sector rallied to an eight-month high in November, and European manufacturing data showed a better-than-expected easing in the sector’s contraction. The strong data suggested that China’s economy could be stabilizing after months of a brutal slowdown, quieting some fears about the trade war’s toll on one of the world’s most powerful economic engines.

But Trump’s early morning announcement quickly cooled markets. By midday, all three market measures were in the red.

“The stock market’s early gains in the futures markets melted away after the President’s early morning tweet,” said Chris Rupkey, chief financial economist of MUFG Union Bank, in a note.

Then came Monday’s U.S. manufacturing report about a half-hour after trading began.

U.S. manufacturing disappointed in November, according to the Institute for Supply Management. Its manufacturing index dropped to 48.1% in November from 48.3% in October, coming in well below analyst expectations. Readings below 50% indicate business conditions are getting worse. Global trade “remains the most significant cross-industry issue,” Timothy Fiore, chair of the ISM’s manufacturing business survey committee, said in the report.

“With manufacturing being in deep trouble globally, today’s PMI reading of 48.1 could mean that the sector won’t avoid a recession, so the consumer economy would have to remain robust to sustain growth in the U.S.,” Ken Berman, a strategist with Gorilla Trades, wrote in commentary Monday.

Also on Monday, the Commerce Department reported a downward revision in September construction spending that showed a 0.3% decline instead of the 0.5% surge as originally reported.

November was a blockbuster month for Wall Street, as strong earnings and trade hopes yielded 10 record-breaking closes for U.S. indexes. The Standard & Poor’s 500 is still up nearly 25% for the year heading into a period that’s typically high-performing for stocks.

December could also bring progress on the trade front, as the terms of an agreement by the United States, Mexico and Canada could be finalized, while resolution on the first phase of a trade deal with China continues to flit in and out of reach.

Last week, Trump said that negotiators were in “the final throes” of sorting out a trade deal with China that would bring the first phase of resolution in the 16-month conflict. But over the weekend, China’s state-run newspaper, the Global Times, reported that negotiators are optimistic about a deal before the Lunar New Year in January, but that rollbacks of tariffs are essential if a deal is to be reached.

In an interview with Fox Business on Monday, Commerce Secretary Wilbur Ross said progress with China has been “one step forward, one step backward” and made it clear Trump was not looking to compromise on tariffs. Ross said Trump to move forward with the tariff increases slated for Dec. 15 if a phase one deal wasn’t inked by then.

“That won’t interfere with this year’s Christmas. Nobody’s reordering stuff after the 15th of December,” Ross said. “Retailers have stocked up. So, it’s a very good time, if we have to put more tariffs on.”

When Trump announced the reinstated the steel and aluminum tariffs, he pointed to the strength of the markets as evidence that his hard-line trade policies weren’t hurting the U.S. economy.

“U.S. markets are up as much as 21% since the announcement of Tariffs on 3/1/2018,” Trump tweeted Monday. “And the U.S. is taking in massive amounts of money (and giving some to our farmers, who have been targeted by China)!”

On Friday, a top Mexican trade negotiator said that terms of a replacement for the North American Free Trade Agreement – one of the Trump administration’s key goals – could be cemented early this week, fueling hopes that Congress could approve it before the end of 2019. The Trump administration reached an agreement with the governments in Canada and Mexico last year, but it must be approved by the House and the Senate before the changes can become official.

Trump’s renewed tariffs on steel and aluminum dealt a surprise blow to one of Brazil’s most crucial industries in a vulnerable moment for the economy, as unemployment hovers above 10% and growth continues to slow. Brazilian steel exports to the U.S. accounted for roughly $2.6 billion last year – making the U.S. one of Brazil’s biggest markets for steel – and analysts expected the tariffs to be painful.

In Argentina, where steel and aluminum exports represent roughly $700 million, the unexpected news comes as the nation is undergoing a transition of power. If the tariffs persist, they will be one of the earliest diplomatic tests to face the incoming presidency of Alberto Fernández, a leftist politician who will take office within a week.

Before leaving the White House for a trip to a NATO gathering in London, Trump told reporters he had given Brazil and Argentina “a big break on tariffs, but now I’m taking that break off.”

“It’s very unfair to our manufacturers and very unfair to our farmers,” Trump said. “Our steel companies will be very happy, and our farmers will be very happy.”

The flurry of potential trade activity is coalescing during what is typically a period of low volatility and high advances for stocks, said Sam Stovall, president of CFRA Research.

“Seasonal optimism typically gathers additional steam in the final month of the year as investors look to earnings projections for the coming year. Indeed, since 1945, the S&P 500 posted its best average return in December, along with the highest frequency of advance and lowest level of volatility,” Stovall wrote in a note to investors Monday. “Trade relations, earnings estimates and valuations will likely influence trading this month, while the angle of ascent for U.S. economic growth, along with the presidential primaries, will garner additional attention as the new year progresses.”

The Institute for Supply Management data on Monday showed the factory purchasing managers’ index unexpectedly declined to 48.1, near the expansion’s low point, from 48.3. The median forecast in a Bloomberg survey of economists called for an improvement to 49.2. Readings below 50 indicate activity is shrinking.

The figures show the manufacturing sector, while no longer in freefall, lacks upward momentum in an environment of corporate investment cutbacks, subdued global demand and a still-simmering U.S.-China trade war. At the same time, factory gauges in China and Germany suggested the worst may be over for the sector.

Consumer spending continues to keep the U.S. expansion going, and other reports indicate American factory activity is gradually firming. A similar PMI issued Monday by IHS Markit rose to a seven-month high of 52.6 in November, after the government reported last week that business-equipment demand climbed in October by the most in nine months.

Still, the ISM’s measure of factory orders declined in November after consecutive gains and, at 47.2, matches the lowest readings of the expansion. While 20.5% of respondents — the same as in October — reported higher orders, the share indicating lower bookings increased by 2.7 points to 31.2%. These figures signal that the surprise jump in the government’s October reading for capital goods orders and shipments may not be sustained.

Thirteen industries, including wood products, furniture, textiles and fabricated metals, reported that business shrank in November.

The ISM’s survey indicated a deeper decline in factory employment, while the gauge of order backlogs dropped to its lowest level since January 2016. That helps explain why factories can operate with leaner staffing. The group’s gauge of production, while rising for the first time since June, contracted for a fourth month.

An ISM measure of exports, after expanding in October for the first time in four months, fell back into contraction. The imports gauge also signaled a contraction, albeit a milder one than a month earlier.

The gauge of supplier deliveries was the only component above 50, indicating shipments of inputs are slowing.

An index of prices paid contracted for a sixth straight month, a sign that weak demand is holding down inflation.

However, the confidence of respondents in the non-manufacturing sector held steady this month, the report said. Their order books and investment sentiment improved slightly, while the positive performance outlook edged down.

The three-month BSI fell to 52.7 due to a softened positive outlook in almost all sub-indices, especially in production and performance.

In November 2019, the BSI decreased from the previous month to 47.4, mainly driven by a pessimistic view of respondents in the manufacturing sector.

Automotive and petroleum-related sectors showed reductions in production, performance and orders because of a sluggish demand both domestic and external, as well as inconclusive trade negotiations between the US and China.

There was also a broad-based decrease in sub-indices, especially for production and performance.

In particular, respondents in the construction and machinery manufacturing sectors were less optimistic on future production and performance, in line with their investment conditions that have not recovered yet.

However, the expected BSI and almost all sub-indices remained above the 50 threshold, indicating that most respondents still expected an economic expansion in the future, the report said.

Weak domestic demand remained the most important constraint in doing business this month, consistent with the persistent deterioration of sentiment in domestic order books for six consecutive months.

Furthermore, more respondents expressed concern over economic uncertainty, which was also partly reflected by the downtrend of the performance sentiment index as well as the worsened business sentiment in employment over the last three months particularly in the manufacturing sector.

However, expected inflation in the next 12 months remained unchanged at 1.7 per cent, the report added.