Will the China Trade War Reach a Deal?


Dec. 12 2019, Published 7:35 a.m. ET

The US-China trade war has impacted both of the countries. A trade deal with China still looks uncertain. Notably, the new tariffs are scheduled to start this Sunday. Phase one of the trade deal appeared to be on the table for both sides last month. China has been focusing on demands to roll back the tariffs. The US has been stressing about agricultural purchases. There have been several rounds of negotiations to reach a deal. However, the countries aren’t there yet.

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More tariffs, no tariffs, or delayed tariffs?

According to Reuters, President Trump will likely meet top trade advisors today. They will discuss the upcoming tariffs. The US has planned to impose 15% tariffs on additional Chinese goods worth approximately $160 billion on December 15. The goods include laptops, toys, and phones. Phase one of the trade deal is important mainly due to the deadline. However, we’ll have to see if there will be a partial trade deal or if it gets delayed.

Market participants might not like going ahead with the tariffs planned for December 15. An escalation in the trade war could dent the market sentiment. Some kind of trade truce would lift the markets’ mood. Currently, the (DJIA) (DIA) and the S&P 500 (SPY) indexes are trading close to record highs. So far, they have risen almost 19% and 24%, respectively, this year. However, if the Trump administration chooses to go midway and delays the tariffs beyond December 15, it will likely mean more negotiations and continued uncertainty. If there’s more uncertainty, the markets might still experience choppy trade.

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US-China trade war

The US and China have been engaged in a trade war for the last several months. Notably, the trade war has impacted both economic giants. The situation might get worse amid the intensifying global slowdown. President Trump might not want more risks since the presidential election is next year.

For the last several months, trade representatives said that the talks were going very well. However, the differences between the two countries increase. Last week, the Wall Street Journal reported that the US wants China to buy $40 billion–$50 billion in farm goods every year, regardless of market conditions. The figures is notably higher than China’s farm purchases of $8.6 billion in 2018.

Tech stocks fared well

Tech giants have played a huge role in driving the broad market indexes up this year despite the China trade war. Among the top Dow Jones components, Apple (AAPL) stock leads the gains. So far, the stock has risen more than 70% this year. Microsoft (MSFT) has risen approximately 50% in 2019. In addition to US equities, Chinese stocks have been on a decent run this year. Alibaba (BABA) and JD.com (JD) have risen 50% and 60%, respectively, this year.


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