The Standard & Poor’s 500 stock index finished up 1.16% today, closing at 2644.69, as traders and investors decided that the tariff measures targeting China that the Trump administration announced last night and the retaliatory measures announced by China today would never be put into effect. Instead the two countries would talk away their trade differences, or the Trump administration would back down, or something.
You’ll note that I’m skeptical.
The S&P 500 opened down roughly 30 points from yesterday’s close as the market decided that the Trump administration and China were on a collision course. Late yesterday the Trump administration had announced 25% tariffs on 1,300 Chinese products in transportation, healthcare, and technology.
Today the Chinese government announced a list of U.S. exports, including airplanes, chemicals, soybeans, frozen beef, cotton, bourbon, and tobacco, and other agricultural commodities that will be subject to Chinese tariffs if the U.S. plan goes into effect. The Chinese list focuses upon products from states from Iowa to Texas that voted for Trump in the 2016 presidential election. U.S. export products that look likely to face additional tariffs include Tesla and Ford cars, Gulfstream jets made by General Dynamics, and Brown-Forman’s Jack Daniel’s whiskey.
The Trump administration list won’t go into immediate effect. First there’s 30 days of public comment. The Chinese list is contingent on U.S. actions.
Trump administration officials from Commerce Secretary Wilbur Ross to new White House economic advisor Larry Kudlow were quickly out talking the financial markets in off the ledge. Ross told CNBC it would not be surprising if negotiations ensued, but did not say when this might happen. As he was leaving his initial White House meeting with President Donald Trump since becoming chief economic advisor, Kudlow was asked by reporters whether the United States could lose a trade war. Kudlow said, “No. I don’t see it that way,” he said. “This is a negotiation, using all the tools.”
One of the first opportunities for the United States and China to open trade talks will be the April 20-22 meetings of the International Monetary Fund and World Bank in Washington. Financial officials frequently meet on the sidelines of those sessions to thrash out bilateral issues. A U.S. official, speaking on condition of anonymity, said no talks had been scheduled yet between U.S. Treasury Secretary Steve Mnuchin and his Chinese counterpart during the IMF meeting.
Why am I skeptical of this talk of talks? How about this Twitter blast from the President this morning: “When you’re already $500 Billion DOWN, you can’t lose!” the president wrote.