UPDATE: China and the United States have agreed to hold more trade talks in Beijing, Vice Premier Liu He said, as President Trump ordered his trade chief to begin the process of imposing tariffs on all remaining imports from China.
Mr. Liu voiced a measured optimism on reaching a deal, but said there were “issues of principle” on which China would not back down.
The United States escalated a tariff war with China on Friday by hiking levies on $200-B worth of Chinese goods in the midst of last-ditch talks to rescue a trade deal. President Trump issued orders for the tariff increase, saying China “broke the deal” by reneging on earlier commitments made during months of negotiations.
“Negotiations have not broken down,” Mr. Liu, China’s chief negotiator in the talks, said, according to state television.
“Quite the opposite, I think small setbacks are normal and inevitable during the negotiations of both countries. Looking forward, we are still cautiously optimistic,” Mr. Liu said.
President Trump fueled early trade angst when he said there was no need to rush a deal after the tariff rate on $200-B of Chinese imports was raised to 25% from 10% early Friday. He added that the U.S. was working on another set of 25% tariffs on $325-B of Chinese imports.
The persisting trade uncertainty prompted broad-based selling in equities and general efforts to de-risk. The S&P 500 also fell below its 50-day moving average (2862). Selling conviction abated soon after the conclusion of the current round of trade negotiations in Washington.
Treasury Secretary Steven Mnuchin described the talks as “constructive,” and China’s Vice Premier Liu He said they went “fairly well” and the positive-sounding comments triggered a Key reversal.
The US is giving China up to 4 more weeks to reach a deal, which helped provide some clarity on a timeline and improve optimism about the prospects for a deal. President Trump said that talks will continue in the future, and that tariffs may or may not be removed depending on the outcome of these discussions.
The rally caught investors off guard prompting short-covering action that drove the recovery. The S&P 500 was able to close solidly above its 50-Day MA (2862).
DJIA +114.01 at 25942.37, NAS Comp +6.35 at 7916.92, S&P 500+10.68 at 2881.40
President Trump said early Friday that that there “is absolutely no need to rush” in talks with China, which are continuing in a “very congenial manner.”
His comments came as Beijing said it plans to retaliate over the U.S. tariff hike that raises duties on $200-B of Chinese imports from 10% to 25%.
The President outlined the plans for the money from the tariffs, saying the payments will go to the US Treasury, and that the process has begun to place additional tariffs of 25% on the remaining $325-B.
“The US only sells China approximately 100 Billion Dollars of goods & products, a very big imbalance,” said President Trump. “With the over 100 Billion Dollars in Tariffs that we take in, we will buy agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance.”
He also said the tariffs would bring in “far more” wealth than a more traditional deal, and that they are “easier & quicker to do.”
“We have lost 500 Billion Dollars a year, for many years, on Crazy Trade with China,” he continued. “NO MORE!”
Top US and Chinese trade negotiators are in the 2nd day of talks Friday as Washington went ahead with plans and hiked tariffs on hundreds of billions of dollars of goods imported from China.
The US has the leverage, and will drive China into a recession if it does not align, stay tuned…
Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin talked for 90 mins Thursday and are expected to resume talks Friday.
Officials did not speak to reporters as they left the talks.
Before they got back around the table Friday, the United States increased duties on $200-B of Chinese goods, to 25% from 10%. The duties apply to cargoes leaving China after 12:01aEDT (0401 GMT) Friday.
Consumer products, including cell phones, computers, clothing and toys, are to be especially hard hit.
Thursday, President Trump focused on the $325-B in Chinese goods that are untouched by the trade dispute, saying he was “starting … paperwork today” to tax those with a punitive tariff of 25%.
President Trump, who has adopted protectionist policies as part of his “America First” agenda aimed at re-balancing global trade and boosting US manufacturing, accused Beijing of reneging on commitments made during months of negotiations.
“We were getting very close to a deal, then they started to renegotiate the deal. We cannot have that. We can’t have that,” President Trump said at an event at the White House.
President Trump said if the 2 sides cannot make a deal, the United States would go back to manufacturing products that China now makes.
“It will be the old-fashioned way, the way we used to do it: We made our own product,” he said.
Wednesday, President Trump triggered some optimism into the market after he Tweeted that China’s Vice Premier was coming to Washington to make a deal.
“….Guess what, that’s not going to happen! China has just informed us that they (Vice-Premier) are now coming to the US to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling US coffers…great for U.S., not good for China!” President Trump concluded.
Press Secretary Sarah Sanders later said that the White House received an indication that China wants to make a deal.
Both remarks drove stocks higher, despite both statements being nearly identical and neither giving the market any new information.
China had confirmed it was planning on coming to the US this week, and it would not have done so if it did not intend to work on a trade deal.
The new element, if true, is that Reuters indicated sources said China backtracked on nearly all aspects of a trade deal last week.
The report raises uncertainty about when, if it all, a deal might get done with the tariff rate on $200-B of Chinese imports set to increase at 12:01a Friday.
On that notion, the stock market traded with modest, but broad-based, gains during the afternoon before finishing flat to unchanged at the close.
Most of the S&P 500 sectors finished little changed. The utilities (-1.4%) and communication services (-0.4%) sectors underperformed, while the health care (+0.1%) and real estate (+0.1%) sectors outperformed.
Wednesday, the major US stock market indexes finished at: DJIA+2.24 at 25967.33, NAS Comp-20.44 at 7943.30, S&P 500 -4.63 at 2879.42
Volume: Trade on the NYSE came in at 815-M/shares exchanged
- NAS Comp +19.7% YTD
- Russell 2000 +16.8% YTD
- S&P 500 +14.9% YTD
- DJIA +11.3% YTD
HeffX-LTN’s overall technical outlook for the major US stock market indexes is Neutral to Bullish in here.
Have a terrific weekend…
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