After a rough patch in May 2019, markets are finding reason to rally…
The Dow Jones Industrial Average rose 6% in the first two weeks of June so far, with many analysts speculating the trade war spat may finally be cooling off.
Jitters eased a bit, at least in regards to the U.S.-Mexico trade issue after President Trump suspended plans to impose tariffs on Mexican goods.
All after the two countries struck a deal on immigration.
So, what’s ahead?
Once Mexico agreed to ramp up its efforts to restrict the flow of illegal immigrants across the southern border with 6,000 National Guard troops, Trump agreed to drop threats of a 5% tariff. In addition, Mexico has agreed to “dismantle human smuggling and trafficking organizations,” according to the U.S. State Department, as quoted by the Associated Press.
Trade War Uncertainty Still Lingers
However, the president is not backing down from his initial tariff threats, warning that if Mexico fails to act, tariffs will be used. “We do not anticipate a problem with the vote but, if for any reason the approval is not forthcoming, tariffs will be reinstated,” he tweeted.
In fact, failure could lead to tariffs of up to 25% on all imports from Mexico.
Trump Doubles Down on Tariff Threat to China
Seeing tariffs as an effective way to force change, Trump is threatening to slap tariffs on another $300 billion worth of Chinese goods. All if Chinese President Xi Jinping fails to meet the U.S. president at the Group of Twenty (G20) meeting later this month.
However, China doesn’t seem too concerned.
“Our attitude on the trade war has been firm and clear: China doesn’t want a trade war but we are not afraid of fighting it,” said Chinese Foreign Ministry Spokesman Geng Shuang, as quoted by CNN. “If the U.S. is willing to negotiate on an equal footing, our door is open. If the U.S. insists on escalating trade frictions, we will respond firmly and keep it company to the end.”
Should the trade spat with China intensify, investors worry China could retaliate by banning rare-earth exports, which are used in products such as mobile phones, memory chips, and batteries.
Markets will be paying close attention to the G20 meeting to see what happens next.
Do you think trade war tensions are overdone — or just getting started? Leave a comment.
