While an interim trade deal is still very much on the cards for the U.S. and China, signing is not likely to occur in 2019, according to reports.
As China pushes for extensive tariff rollbacks, President Trump is countering with his own statements. While visiting Apple’s Mac Pro factory in Texas this week, the President said of China that “I don’t think they’re stepping up to the level that I want.”
Trade news has been a key factor in stock sentiment this year, and a lack of positive news this week led to index declines on Thursday.
Mixed Messages Leave Investors Uncertain
Treasury Secretary Steven Mnuchin said last month that a phase one trade deal could be signed within five weeks. That window has now passed, without any meaningful progress on either side.
China has asked the U.S. to roll back existing tariffs before a deal can be signed. However, President Trump and his administration are still waiting for meaningful progress on China’s promises to open up its market to foreign businesses. There are also core issues surrounding technology transfers and intellectual property rights, which are yet to be addressed.
China’s Vice Premier Liu He said last month that he was “cautiously optimistic” that a trade deal would be signed soon. With 2020 fast approaching, a potential signing may run into the first quarter of next year.
Tariff Deadline is Coming Up
President Trump will apply new tariffs to consumer goods from China on December 15 if a phase one deal is not signed. This is something that investors don’t want to see.
However, there could be good news for Apple, the most valuable stock on the market today. President Trump told the media this week that he was considering an exemption for the tech company on any future tariffs. Smaller businesses and consumers would not receive the same kind of protection.
While a trade deal in the long term is very likely, Trump won’t sign anything that isn’t considered a win for America. China has stepped back on numerous promises in the last year. New tensions have now arisen as Congress passed a bill condemning China’s handling of ongoing Hong Kong protests.
The NASDAQ was down 0.2% at the close of the market on Wednesday. The S&P 500 and Dow Jones fell by the same percentage.
While there is inherent strength in the market, thanks to a strong consumer economy and a better than expected earnings season, the White House will need to carefully manage the trade situation and any statements surrounding it. President Trump often uses the stock market as a measure of success for his economic policies. Any continued slides could erode the messaging that he has carried throughout this year.
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