The situation between US and China continues to change day by day. On Thursday, it was reported that a rollback of tariffs between the United States and China had been proposed as part of a phase one deal. However, this trade agreement has not yet been completed, and some speculate that the arrangements may be going back to stage one. The stock market remains tumultuous in the wave of this erratic news. Just days later, Trump disputed reports that his administration was considering halting the trade war with America’s eastern rival.
Is an end to this long feud finally coming to an end? What would this mean for both economies? Let’s take a closer look at the facts.
Rollbacks Proposed Between the United States and China
The White House was optimistic on Thursday that the end to the tariffs was nearing, which was good news to the U.S. and Chinese economy. The trade war has been intensely divisive and has impacted both economies negatively. China and the United States do a tremendous amount of trade with each other, and these tariffs have been hurting the citizens of both countries.
News of trade deals have been increasing the volatility of the stock market, which aggressively rises on positive news and sharply falls on negative news. On Thursday, the stock market was bolstered by the White House’s optimism, but then faltered upon further news that the plan wasn’t as secure as was initially reported.
Trump Isn’t Sold On a Deal…Yet
The Friday after the announcement, Trump stated that he had not agreed to a rollback on tariffs and that the US and China were still in talks. “They’d like to have a rollback,” he stated. “I haven’t agreed to anything.” With the White House stance being as it has been, there may be a fear of seeming weak in terms of negotiations.
This has continued Trump’s hard line stance against China, which has been consistent. He further stated that while China would like a full roll back of all the tariffs, he was only considering a partial one.
The negotiations between the US and China have been on-going, and both countries have been particularly stubborn. Trump is interested in dealing with issues such as intellectual property theft, which has been a growing concern for United States’ innovators and manufacturers.
China Leaves Issues Still to Address
The United States needs China for the purchasing of agricultural goods, and without China many United States farmers have been unable to sell their crops. Meanwhile, China has been turning to other sources such as Canada for their crops, and US farmers worry that the business may never come back to the US.
But despite this issue with agricultural sales, the US is hesitant to give into China’s demands.
Intellectual property theft may very well be more damaging to the US than the adverse agricultural sales. Presently, a great deal of manufacturing occurs in China. When US companies send their plans to China, Chinese companies often mass produce these plans, in shadow factories that can produce products at nearly the same quality.
Intellectual property theft means that any innovation that occurs in the United States can be easily replicated in China. And that means that the tech and engineering sectors are severely hampered. While agricultural sectors are also important, they may not be worth losing the intellectual property war. The hope is that the White House will be able to secure agricultural contracts as well as an intellectual property crackdown.
The Future of the Trade Deal
One way or another, the trade deal situation should be resolved shortly, as it’s currently wreaking havoc on the international economy. New tariffs were planned as of December 15th, which would further hinder both economies.
Currently, the countries are considering the phase one deal, and the deal should be worked out and signed within the United States. Until the deal is actually signed, however, the market is particularly vulnerable to news-based manipulation.
All traders want to be able to jump on the correct wave, which means investors are watching the news very closely. At any positive signs, the market will jump, and on negative signs, the market will fall.
Non-professional investors should stay the course on their current investing techniques and avoid trying to time the market. The situation is presently so volatile that it’s almost impossible to determine the risk in investing now, due to the heavy influence of speculation.
