US Delays China Tariffs: Is Trump Scared of a Recession?

The US has delayed additional tariffs on some Chinese goods until December. Earlier this month, President Donald Trump said that the US would place a 10% tariff on an additional $300 billion worth of Chinese goods on September 1.

China tariffs delayed

The US has delayed the implementation of the new 10% tariff on China from September to December. The office of the USTR (US Trade Representative) released a statement on the matter. It said, “Certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent.” It added, “Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles. Products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.”

Stock markets rally following the delay

The trade war’s escalation has negatively affected US markets this month. The markets have bounced back sharply today after the announcement that the tariffs on China will be delayed. Apple (AAPL), Micron (MU), Intel (INTC), and NVIDIA (NVDA) were up 3.8%, 3.7%, 2.2%, and 2.7%, respectively, as of 11:25 AM ET. The S&P 500 (SPY), the Dow Jones Industrial Average (DIA), and the Nasdaq Composite (QQQ) were up 1.3%, 1.3%, and 1.5%, respectively, as of the same time.

Trump continues to slam China

While the US has delayed tariffs on some Chinese goods, President Trump has continued to slam China. Today, he tweeted,Through massive devaluation of their currency and pumping vast sums of money into their system, the tens of billions of dollars that the U.S. is receiving is a gift from China.” In another tweet, he said, “As usual, China said they were going to be buying ‘big’ from our great American Farmers. So far they have not done what they said.”

Recession fears

Several brokerages, including Morgan Stanley and Goldman Sachs, predict a recession if the US-China trade war escalates. Tariffs on consumer products would have led to higher costs for US consumers. Higher prices for daily use goods would have lowered US consumers’ buying power. The consumer sector’s strength has helped the US economy even as some other sectors have faltered. President Trump might not want to risk a recession ahead of the 2020 election.

Could trade talks yield results?

It’s too early to say whether delaying tariffs on some Chinese goods will help the US reach a trade deal with China. This month, the US designated China as a currency manipulator. The move incited sharp criticism from China. China has also stopped buying US agricultural products.

With that said, the delaying of the tariffs looks like a positive step by the US.