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US-China Trade War: Calm Resolution May Not Be Close

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The US-China trade war escalated last week, leading the markets to plunge on Friday. However, the markets are in the green today. As President Trump’s recent comments on the trade war are helping the markets today, Apple, Alibaba, Facebook, and NVIDIA are trading in the green.

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US-China trade war

Referring to a MarketWatch report early this morning, President Trump tweeted, “Great respect for the fact that President Xi & his Representatives want ‘calm resolution.’ So impressed that they are willing to come out & state the facts so accurately.”

Notably, there was a fresh escalation in the US-China trade war on Friday. Reuters reported today that China’s Vice Premier Liu He said, “We are willing to resolve the issue through consultations and cooperation in a calm attitude and resolutely oppose the escalation of the trade war.”

Many economists expect that an ongoing US-China trade war could push the global economy toward a recession. Morgan Stanley also warned of a recession if the US-China trade war escalates.

Trump on the US-China trade war

CNBC reported that at the G-7 summit in France, Trump said, “China called last night our top trade people and said ‘let’s get back to the table’ so we will be getting back to the table and I think they want to do something. They have been hurt very badly but they understand this is the right thing to do and I have great respect for it. This is a very positive development for the world.”

Stock markets are broadly higher following Trump’s comments. At 12:50 PM EDT, Apple (AAPL), Alibaba (BABA), Facebook (FB), and NVIDIA (NVDA) were up 2.0%, 1.3%, 1.2%, and 1.9%, respectively. Apple and Alibaba fell 4.6% and 4.3%, respectively, on Friday. Facebook and NVDA fell 2.4% and 5.3%, respectively, on the day.

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China’s response

However, Hu Xijin, chief of China’s Global Times, disputed Trump’s claim. He tweeted, “Based on what I know, Chinese and US top negotiators didn’t hold phone talks in recent days. The two sides have been keeping contact at technical level, it doesn’t have significance that President Trump suggested. China didn’t change its position. China won’t cave to US pressure.”

Notably, the US-China trade war has taken a toll on the Chinese economy. The IMF also said that the US-China trade war is hurting the Chinese economy.

China wants a resolution to the trade war

Although China appears to want a resolution to the trade war, it hasn’t been amenable to some of Trump’s demands. For example, China wants the existing tariffs to be eliminated, and the United States wants the tariffs to stay until a trade deal is reached.

The United States and China haven’t been on the same page when it comes to enforcement mechanisms. In our view, Trump’s hope of a “calm resolution” to the US-China trade dispute looks like a distant hope as we look at the trade war’s current landscape.

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