President Trump’s ongoing trade war with China has been a thorn in the side of the stock market since early 2018. Negative rhetoric and tit-for-tat tariffs have created volatile conditions at various points throughout the last 18 months.
It was announced this week that China and the U.S. will be heading back to the negotiating table, although investors will have to wait at least a month before officials meet. This news could help to stabilize the market in the coming weeks, potentially shielding it from the volatility that was seen in August.
Vice Premier Agrees to Trade Meeting
The Chinese Ministry of Commerce announced on Thursday morning that Vice Premier Liu He had agreed to restart trade negotiations in “early October”. No specific date has been given at this time.
According to the Chinese statement, negotiators and their support teams will “conduct conscientious consultations” to prepare in September. The Ministry stated that both sides want to create “favorable conditions.”
The statement is not dissimilar to what has been seen from China in the past. While officials have been more than willing to come to the negotiating table, they have so far failed to meet key U.S. demands.
American negotiators want to see proof that China will create fairer conditions for foreign businesses. Intellectual property protections have not been guaranteed, and China has irked U.S. negotiators by planning a government-led program that would boost Chinese robotic and technology industries.
U.S. negotiators see this as China not willing to play fair in a free market.
Patience could be running out on the American side. If China comes to the negotiation without any willingness to address the points of contention, then we will likely end up in a holding position with no hope of a deal on the horizon. This could be detrimental to the stock market in the final quarter.
The Clock is Ticking on China Growth
China’s manufacturing industry has been slowing down, partially due to tariffs and the trade war. It’s in China’s best interests to reach an agreement.
The U.S. is also feeling the pain of a tense relationship.
Tariffs on Chinese goods will impact American consumers in the coming weeks. Everything from toys to textiles will be hit with tariffs of up to 15%, resulting in higher retail prices. China has retaliated with tariffs on pork, soybeans, and corn, which will hurt American farmers.
Investors should watch the trade news closely, while also understanding that this protracted war does not define the health of the market. Fundamentally strong stocks still have value, even during volatility. Any slides due to negative trade news could be used as opportunities to buy stocks while they’re down.
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