(Reuters) – Wall Street was set to open lower on Friday after a sharp escalation in U.S.-China trade tensions and tepid job growth in July reinforced fears of a global economic slowdown.

The Labor Department said nonfarm payrolls increased by 164,000 jobs last month and the economy created 41,000 fewer jobs in May and June than previously reported. However, July’s numbers were in line with economists’ expectations.

“Job numbers were not too far from expected, it shows the trend is slowing down. It’s consistent with another rate cut either in September or October,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“The bigger issue for the Fed policy outlook is the tariff issue because that implies you will see higher costs for finished goods rather than intermediate goods that we have been importing from China.”

The report comes a day after President Donald Trump threatened to slap a 10% tariff on $300 billion of Chinese imports from next month, sending global markets tumbling overnight and investors fleeing for perceived safe-havens like U.S. Treasuries and the Japanese yen.

China on Friday said it would not be blackmailed and warned of retaliation.

Industrial bellwethers Boeing Co (BA.N) and Caterpillar Inc (CAT.N) fell 0.5% and 0.6%, respectively, in premarket trading.

Shares of tariff-sensitive Apple Inc slid 1.1%, while chipmakers, which get a large portion of their revenue from China, also took a hit.

The sudden escalation in the trade rhetoric comes after the Federal Reserve on Wednesday played down expectations of further aggressive monetary policy actions after cutting interest rates for the first time in a decade.

Hopes that the Fed would be more accommodative to counter the impact of the bruising trade war had helped Wall Street’s main indexes hit record highs last month.

Fed funds futures implied traders were positioned for a 100% chance the central bank would reduce its target range on interest rates by a quarter point in September, CME Group’s FedWatch program showed. [MMT/]

At 8:43 a.m. ET, Dow e-minis 1YMcv1 were down 87 points, or 0.33%. S&P 500 e-minis EScv1 were down 12.75 points, or 0.43% and Nasdaq 100 e-minis NQcv1 were down 61.25 points, or 0.78%.

Semiconductor stocks Micron Technology (MU.O), Nvidia Corp (NVDA.O), Applied Materials Inc (AMAT.O) and Intel Corp (INTC.O) fell between 1.3% and 3%.

The second-quarter earnings season is in full swing, with 74.4% of the 355 S&P 500 companies that have reported so far beating profit estimates, according to Refinitiv data.

NetApp Inc (NTAP.O) slumped 17.9% after the data storage equipment maker lowered its forecast for the first quarter and 2020, blaming a weakening macro environment in the latter half of the quarter.

Pinterest Inc (PINS.N) jumped 15.2% after the online scrapbook company raised its full-year sales forecast and reported second-quarter revenue above estimates.

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