Asian and European stocks fell on Thursday, along with U.S. futures, following a report that China has no confidence in finalizing a trade deal with President Trump.
Bloomberg reported the news, claiming that Chinese officials have pledged not to change their positions on key issues. The media company also reported that top ranking Chinese politicians find it difficult to deal with President Trump’s impulsivity.
The news comes just a few weeks after the U.S. agreed to hold pending tariffs, in exchange for China’s promise to purchase American agricultural products.
Investors who have been following the trade war for almost two years will see this as yet another setback.
How Badly is a Trade Deal Needed?
Damage caused by the ongoing trade war has been significant and widespread. In early October, the Managing Director of the International Monetary Fund warned that ongoing tensions would have a $700 billion global impact by 2020.
In the U.S., farmers have suffered, especially pork and soy producers. China was a major consumer of American agricultural products before the trade war.
The Chinese side has also suffered. Huawei, a Chinese technology company and one of the largest in the world, is essentially banned from the U.S. market today, partially due to trade tensions, and because of concerns that its equipment includes backdoors that can be used for espionage.
China is the world’s largest manufacturer, but its industry has been slipping throughout the trade war. Tariffs have made China’s economy less competitive. At the end of October, Chinese manufacturing dropped to an eight-month low.
U.S. consumers have been largely shielded from tariffs, but that could change if new hikes are introduced after the holiday season. Some of President Trump’s pending tariffs could be applied to basic consumer goods like children’s toys, apparel, and electronics.
The U.S. economy slowed in the third quarter, with Gross Domestic Product hitting 1.9%. Consumers are the driving force of Gross Domestic Product, so any loss of confidence related to goods prices could compromise the economy moving forward.
Investors Need to Follow the Trade War Closely
There was hope that a limited trade deal would be signed between President Trump and President Xi Jinping in Chile this November. However, the planned APEC conference was cancelled due to ongoing mass protests in the nation’s capital.
Investors have become fatigued by regular trade war headlines, but it’s critically important to follow them. Both positive and negative trade news can influence stocks and futures. Investors that are up to date can make more informed decisions.
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