It was earlier this year when the trade wars between the United States and China began. President Donald Trump started it off by putting $200 million worth of tariff in Chinese goods last January.
This was all due to the belief that Chinese people do not respect nor follow the intellectual property rights especially on technology, which is one of the most popular as well as most expensive goods.
This also led to the United States Trade Representative to be asked by the president to apply tariffs on Chinese goods a few months after that which is said to be worth $50 billion. It was revealed that over a thousand categories of Chinese imports turned out to be listed for tariffs and Trump relied on Section 301 of the Trade Act of 1974, hence imposing tariffs became his response for the untrained trade practices against China.
This of course made a massive effect on American businesses since some of their products or pieces of equipment are bought from China. This then led to some stocks and shares going downhill and investors are too far from being happy about it. However, during a summit last week, it would seem that the two leaders decided to take a break from this trade wars.
Trump-Xi Trade Wars Truce
Last week, United States President Donald Trump met up with Chinese President Xi Jinping at the Group of 20 meeting in Buenos Aires, Argentina. It was agreed over a steak dinner that President Trump will hold off on any new tariffs if and only if President Xi Jinping increases their purchase of American products.
This was said to be comprised while the two were having dinner along with the other leaders, but it was obvious that none of them are planning on backing down when it comes off the market access and the trade policies since they didn’t talk about it the said matter like it should. The White House made an announcement about this and even called it a highly successful meeting between the leaders since it involved a handshake deal.
According to Larry Kudlow who is the economic counselor of the White House, there are still a lot of bumps on the road that the trade deal needs to look out for, but the truce that happened in between the two powerful leaders was a great sign.
It turns out that Trump will only postpone the massive tariff imposition for just three months to give way for both countries to negotiate over some policies that need to be agreed on to benefit both nations. In a conference call that Kudlow had with the press, he simply said that he will remain cautiously optimistic about this matter. That is because this is the very first time that Chinese President Xi has been hands-on with this dispute.
Investors Hope For Progress
Only time will tell how things will go in between these two, nations, but with the recent announcement of truce on the trade wars, stocks started to climb all the way up. A major boost was seen in the last few days after the meeting between Trump and Xi happened.
According to some experts, this is indeed a very good sign since this is a chance for investors to take the time while the two nations are trying to sort out their differences. One proof of that would be the 2.7 percent jump from Shanghai Composite index last Monday, as well as the 2.8 percent increase for Hang Seng in Hong Kong.
This is considered to be a major improvement compared to the steep decline that happened last October as well as the steady stocks from last month, which resulted in investors abandoning the sinking ship.
The trade wars are not the only thing affecting the stocks, but it is also the gradual interest rates hike from the Federal Reserve as the end of the longest bull market in the history approaches.
However, another good news is upon us when Federal Reserve chairman announced that there is a possibility that the central bank will take a break from increasing the rates as the year ends. Last week was one of the highest increase stocks have seen with S&P 500 rising about 5 percent.