The trade war and tense political conditions between the US and China have taken another turn. As negotiations unfolded in Washington, talks seem to have taken a positive spin.
A Chinese newspaper reported that a potential trade and currency deal would benefit both parties.
Trump described the state of negotiations “I think it’s going really well. I will say, I think it’s going really well. So we had a very, very good negotiation with China. They’ll be speaking a little bit later, but they’re basically wrapping it up”
Chinese advisors took the chance to advise Washington to accept the proposes suggested by Liu He so that both parties could agree a mutually beneficial pact.
The everlasting trade war has led to a battle of economic and political sanctions, derived from both parties lasting more than 15 months
Liu described the approach “The Chinese side came with great sincerity, willing to cooperate with the US on the trade balance, market access and investor protection,”
China evidently are keen to end this never ending saga, as any further sanctions would derail China’s near term growth prospects.
The negotiations have come timely for China, as the United States was set to increase tariffs on Chinese Imports by $250 million at a rate of 30%, an increase by 5% from October 2015.
The tariff war has had adverse effects on the global market as well as foreign exchange rates. Investor confidence has died, as well as heavy downward pressure on growth has become a product of this feud.
Myron Brilliant, head of international affairs at the US Chamber of Commerce said “Both sides have been losing, and so has the global economy. We all know we can’t afford a further escalation of the trade war”
Reports direct from Washington suggested that a mini deal could be on the table but the US President insisted that “he would not be satisfied with a partial deal to resolve his two-year effort to change China’s trade, intellectual property and industrial policy practices, which he argues cost millions of U.S. jobs.”
Ken Bernan founder of Gorilla Trades said ““Even a partial deal could be a huge boost for stocks, especially following this week’s scary headlines”
Since negotiations commenced on Thursday in Washington, equity markets have been boosted by renewed optimism for the two superpowers to strike a deal.
The Dow Jones Industrial Average (INDEXDJX: .DJI) has climbed 0.681% since Thursday along with S&P500 Index (INDEXSP: .INX) rose by 19.58 points to reach 2,938.13.
After the indicator that China was open to a limited tariff resolution with the US combined with a report that China offered to increase purchases of US Agricultural Products by 50%, this formed factors driving the stock market.
Kim Forrest, founder and chief investment officer at Bokeh Capital Management said “talks have been contentious but both sides absolutely know something needs to be done. Semiconductor stocks were up sharply Wednesday, she pointed out, on investor optimism not just about a trade truce, but also better conditions for businesses”
In the final minutes of the trading day, stocks received a late boost following a report saying that Beijing had lowered expectations for significant progress.
Notably after this statement, the iShares PHLX (NASDAQ: SOXX) and the S&P500 futures (INDEXSP: .INX) rose after trader optimism.
Stock futures received positive boosts along with this. Big tech firms such as Facebook (NASDAQ: FB) and Apple (NASDAQ: AAPL) received 1% increases in the premarket. Notably, bank stocks also gained value as JP Morgan (NYSEARCA: AMJ) and Bank of America (NYSE: BAC) also rose by 1%.
It would seem globally beneficial if both superpowers can strike up an agreement to end the war of tariffs and quotas.
However, looking at the recent rhetoric of Donald Trump it would not be a surprise if talks fell through and the US titan allowed this economic war to continue.