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Trump and Xi Jinping Agree to Meet: Will It Break Deadlock?

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May. 14 2019, Published 12:59 p.m. ET

US-China talks

US equity markets slumped yesterday after China retaliated against the US’s tariff hike. President Trump had increased tariffs on $200 billion of Chinese goods and threatened China if it retaliated against the move. China went ahead and increased tariffs on US goods. However, the amount was understandably much lower than US tariffs given the massive trade surplus in China’s favor.

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US equity markets saw a selling spree yesterday, and the S&P 500 (SPY) fell 2.4%. Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOG) fell 5.8%, 3.6%, 3.0%, and 2.8%, respectively. Apple especially came under pressure after the Supreme Court ruling on the antitrust class action spooked investors.

Meanwhile, after his Twitter jabs against China, President Trump seemed to take a somewhat reconciliatory approach after China announced retaliatory tariffs. Trump confirmed that he would be meeting Chinese President Xi Jinping at next month’s G20 meeting, which he said could be “a very fruitful meeting.”

G20 summit

Last year, after the meeting between Trump and Xi Jinping at the sidelines of the G20 summit, the two sides decided on a 90-day ceasefire in their trade dispute. However, after eight rounds of talks since that meeting, negotiators seem to be back at the drawing board, as China allegedly reneged on some of its commitments.

As for President Trump, he has made it clear several times that the country is seeking far-reaching changes in China’s trade policies and not merely purchases of more soybeans and liquefied natural gas. For now, markets will cross their fingers before the anticipated meeting between the leaders of the world’s two most powerful economies.

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