Investors will be watching the news cycle closely this weekend, with tariffs on $160 billion worth of Chinese goods set to kick in on Sunday. The tariffs, which were originally delayed to allow breathing room for the holiday shopping season, could potentially be avoided if President Trump confirms a Phase One trade deal before the end of the weekend.
After weeks of mixed rhetoric from both sides of the trade dispute, there’s now hope that Trump is ready to sign.
Trump Inspires Markets with Optimistic Tweet
For almost two years, China and the United States have been locked in a bitter war of trade tariffs. On the American side, there are demands for China to guarantee protection for U.S. companies and their intellectual properties when manufacturing in the Asian nation.
The Chinese have set their own demands, including asking that Trump removes all tariffs and recognizes China as a market economy.
While these points might not be fully addressed in a Phase One deal, any small progress would be a step in the right direction. With the latest tariff deadline looming, it looks like negotiators are on the right track.
Trump used Twitter, his communications platform of choice, to tease some positive news about the situation. On Thursday he told his followers that America was “Getting VERY close to a BIG DEAL with China. They want it, and so do we!”
Although details about the interim deal are scarce, it is believed that it would have some key provisions. Most importantly, it would:
- Outline China’s commitment to purchase U.S. agricultural products, including soybeans, a major export.
- Prevent Trump from applying new tariffs on Chinese goods, and potentially roll back some of the tariffs that are already in place.
The Wall Street Journal reported earlier this week that the White House would roll back at least half of the existing tariffs on $360 billion of Chinese goods if a Phase One deal is signed.
How Will This Impact the Markets?
The ongoing trade war has failed to derail markets in 2019. Investors have become accustomed to the constant back and forth, and the strength of the American economy has served as a buffer against geopolitical tensions.
Even so, if a deal is confirmed this weekend, it will help to extend the bull market that has persisted throughout this year. If a deal is delayed, there could be a pullback in stocks, but it would likely be short-lived considering the underlying strength of equities today.
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