This has got to be the most bizarre market we’ve ever seen.
Yesterday, markets plummeted 300 points intraday as trade tensions worsened. This morning, Dow futures were up 200 points on a Bloomberg report that China is prepared to accept a partial trade deal, as long as no more tariffs are imposed. According to reports, China will offer non-core concessions like purchases of agricultural products in return, but they will not budge on key issues the White House wants.
Moments later, the Financial Times reported that China offered to buy an extra $10 billion worth of U.S. goods per year. Moments after that, the FT corrected that to $10 million.
To be honest, it doesn’t make a lot of sense with tensions as high as they are, especially with the U.S. blacklisting a slew of Chinese companies, including Hikvision, Megvii Technology, iFlytek Co and SenseTime. Then there’s the U.S. State Department’s decision to impose visa restrictions on some Chinese officials.
While the reports appear encouraging, it’s all a wait and see at this point.
Should trade talks fail in D.C. later this week, markets could again push lower, especially with new Trump tariffs ready to hit. Unfortunately, the closer we get to October 15, 2019, the closer we get to the U.S. increasing tariffs on $250 billion worth of goods. Should the meetings fail this week, tariffs will increase from 25% to 30%.
Trade War Could Cost the Global Economy $700 Billion by 2020
The trade war between the U.S. and China could lead to a loss $700 billion for the global economy by 2020, says Kristalina Georgieva, the new head of the International Monetary Fund, as noted by MarketWatch.
“Everyone loses in a trade war. Even if growth picks up in 2020, the current rifts could lead to changes that last a generation — broken supply chains, siloed trade sectors, a “digital Berlin Wall” that forces countries to choose between technology systems,” she said.
Stay tuned for more on this developing story.
