Last week, the trade war between the U.S and China took a step in the right direction. As I predicted would be the case right here in 10-Minute Millionaire, a “mini-deal” was reached whereby the U.S. agreed to delay the next round of tariffs, and China agreed to purchase American agricultural products.
Despite President Trump tweeting about striking a deal with China on trade last Friday, markets opened lower on Monday.
After weeks of tit-for-tat threats and leaks on trade hanging over the market, you’d think a deal would be welcome on Wall Street, even if it didn’t take on all the issues.
Yes, China had taken President Trump’s two main issues, intellectual property and subsidies, off the table. And yes, the White House had leaked plans a couple of weeks ago to potentially force Chinese companies to delist from U.S. stock exchanges, sending them into a tailspin.
But still, the two sides agreed to take a step back from a full-blown trade war. They struck a deal whereby Trump postponed the tariff hike on Chinese goods that had been meant to go into effect on Tuesday.
In return, China agreed to buy between $40 billion and $50 billion of American agricultural products.
Markets opened lower Monday anyway, as traders and analysts worried if any deal would get done – fueled by China casting a less optimistic tone about “phase one” of the deal being complete.
Then Tuesday, the markets had a strong up day as optimism (and presidential tweets) fueled a broad China-friendly ride higher.
These “will the deal or wont the deal get done” uncertainties are becoming the new form of trade trouble headline risk that traders have to navigate.