Thursday's Market Minute: US/China Trade Truce: Winners & Losers

After continued market choppiness and rising tensions, the U.S. and China have signed a trade deal that temporarily puts economic conflict on a pause. However, concern remains that this deal may not ease trade tensions for long, with numerous issues still unresolved and tariffs still lingering. But indisputably, there are clear winners and losers following the signing. Here are a few of those who could be poised to benefit, and those who aren’t so lucky. Winner: Donald Trump.

The signing offers the opportunity for President Trump to finally put Trade War Phase 1 in the past, and claim the achievement heading into the 2020 presidential election. Markets initially popped following the signing of the deal, but then erased some of their intraday gains on fears this resolution will not hold. Loser: U.S. consumer. The newly-signed deal cuts rates on $120 billion worth of goods, but mostly on higher duties, which will affect an additional $360 billion of Chinese goods. The Congressional Budget Office is estimating that tariff-related uncertainty has cut 0.3% off U.S. economic growth while reducing household income by an average of $580 since 2018. This does not even include lost business due to the foreign conflict. Winner: Xi Jinping.

China emerged Wednesday having agreed to the terms it initially offered early in trade talks, including loosening access to U.S. financial and car firms. The Federal Reserve is estimating that China’s economy has taken a 0.25% hit during the trade war, and will be celebrating its halt. Loser: Farmers. The farming industry nationally and globally could be poised for more strain following the trade truce. Although President Trump has promised new China purchasing could include $50 billion worth of agricultural goods, farmers in the U.S. have seen bankruptcy at record highs - contingent on a $28 billion dollar federal bailout.

This bailout is more than twice as expensive as the 2009 bailout of Detroit’s three largest automakers. Other global soybean farmers could also be hurt by the new deal, as competition from China will steepen and demand outside of that could sink.

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