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US-China Tariffs Analysis: Real rally will require a tweet from Trump

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US-China Tariffs Analysis: Real rally will require a tweet from Trump

– China’s Commerce Secretary Gao Fend said that the cancelation of tariffs had been agreed upon. 

– The market mood has from gloom to cautious optimism.

– The rally or boom will need US confirmation, especially from the President. 

Are the world’s largest economies laying down their economical arms? Chinese Commerce Minister Gao Fend has said that Beijing and Washington have agreed to cancel existing tariffs in different phases.

Markets have reacted positively with S&P futures in the green, and a rise in commodity currencies, and a sell-off of the safe-haven yen. That is a turnaround to the mood on Wednesday, when reports emerged that both countries were postponing their signing ceremony from this month to December, due to various disagreements. The two main sticking points were the US insistence on having a summit on American soil, perhaps in Iowa, and duties.

China has reportedly added demands for further removal of existing tariffs – not only the 15% duties imposed in early September – but also the 25% levies dating back to 2018. Markets fell sharply, and investors flocked into the safety of the yen and also gold.

Markets await Trump’s tariff tweet

Are we seeing the full reversal of this trend? Not so soon.

The announcement by Gao Fend has yet to be corroborated by the Americans – and especially by President Donald Trump. The outspoken leader tends to tweet out his thoughts early in the US morning, usually after 11:00 GMT and before US markets open at 13:30 GMT.

Apart from Trump, comments from other officials may have an impact. US Trade Representative Robert Lighthizer is a critical figure, and the more hawkish Peter Navarro may also dampen the mood.

US-China impact on currencies following Trump’s reactions

If the president confirms the news from Beijing, shares may extend their gains, carrying commodity currencies with them. The euro and the pound – which have their own issues – may advance as well. The safe-haven Japanese may struggle, and also gold prices may extend their falls and get further away from $1,500.

On the other hand, the downfall in case of denial from Washington regarding the cancelation of tariffs may be severe. It would be the second blow within a span of fewer than 24 hours – potentially causing a substantial sell-off.

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