Another tariff hike
The United States has increased tariffs on $200 billion worth of goods from China to 25% from 10%. Tariffs on another $300 billion worth of Chinese goods are also in the cards. China reportedly reneged on some of its previous commitments, which led to the tariff hike.
President Donald Trump tweeted over the weekend, “I think that China felt they were being beaten so badly in the recent negotiation that they may as well wait around for the next election, 2020, to see if they could get lucky & have a Democrat win.” In another tweet, Trump predicted his victory in the 2020 election and warned China that it would get a “far worse” deal in his second term.
The 2020 election
By increasing tariffs, Trump has reinforced his position as a leader who can make hard decisions. Some observers pointed out that Trump might want to settle the China trade deal early to showcase it in 2020. By increasing tariffs, Trump has sent out a signal that he won’t go ahead with a trade deal if it doesn’t address contentious and core issues. If a trade deal isn’t reached before next year’s election, Trump can still reach out to the electorate as a leader who took a tough stance on China.
Meanwhile, US and global markets sold off last week, and the S&P 500 (SPY) had the worst week of the year. Intel (INTC), Micron (MU), and Broadcom (AVGO) have fallen 8.9%, 7.4%, 4.5%, respectively, this month. Qualcomm (QCOM) is trading flat, while Advanced Micro Devices (AMD) is up 1.2%.