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Market Bounces Back After Trump Suggests 'Very Positive Development' In Trade War

Market Bounces Back After Trump Suggests 'Very Positive Development' In Trade War

U.S. stocks were poised to rebound on Monday after an eventful G-7 meeting may have trade negotiations between the U.S. and China back on track for now.

On Monday, U.S. President Donald Trump said representatives from China reached out to say they would like to return to the negotiating table following the latest exchange of tariffs and trade threats between the U.S. and China.

“They have been hurt very badly but they understand this is the right thing to do and I have great respect for it. This is a very positive development for the world,” Trump said Monday.

China’s Foreign Ministry spokesman Geng Shuang later said he was unaware of any phone call, and Trump declined to elaborate on who was involved. The latest news comes after Trump said Sunday that the U.S. and China are getting along very well and that he is very motivated to make a trade deal.

Latest Tariffs

At the G-7 meeting, Trump said existing 25% tariffs on $250 billion in Chinese imports will be raised to 30% starting on Oct. 1. In addition, he said new 10% tariffs on another $300 billion in Chinese goods set to go into effect on Sept. 1 will now be 15% tariffs.

This news came after China announced on Friday new tariffs on $75 billion of U.S. exports set to begin on Sept. 1 and Dec. 15. In response, Trump took to Twitter and ordered all U.S. companies to “start looking for alternatives” to trade partners in China.

On Saturday, Chinese state media outlet Xinhua dismissed Trump’s orders. “Any discussion of severing ties between U.S. and Chinese companies is ridiculous at best,” the outlet wrote.

Political Pressure Mounting

Trump said over the weekend it is within his power to declare the trade war a national emergency.

“I could declare a national emergency, I think when they steal and take out and intellectual property theft anywhere from $300 billion to $500 billion a year and when we have a total lost of almost a trillion dollars a year for many years,” Trump said.

The pressure is mounting on Trump to bring the trade war to some kind of resolution prior to the 2020 election. Trump has already issued a $16 billion taxpayer bailout of U.S. farmers that have been hurt by the trade war. JPMorgan recently estimated that all of the tariffs set to go into effect by the end of the year would cost the average U.S. household about $1,000 per year in added costs.

Positive Turn

On Monday morning, Trump seemed to change to a much more positive tone, and investors noticed.

“I can say we are having very meaningful talks, much more meaningful I would say than any time frankly,” Trump said.

Investors are certainly watching trade tensions closely. In the past month, the SPDR S&P 500 ETF Trust (NYSE: SPY) and the SPDR Dow Jones Industrial Average ETF (NYSE: DIA) are down 4.1% and 4.5%, respectively. The iShares FTSE/Xinhua China 25 Index (NYSE: FXI) is down 7.5%.

Related Links:

China To Raise Import Tariffs On $75B Additional US Goods

Labor Department's 500K Downward Jobs Revision Puts More Pressure On Fed


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