U.S. Stock Markets: Tariff Rollback or New Tariffs – Something Has to Give

Traders are saying the markets could whip back and forth until we see what happens on December 15th to get some sort of clarity in terms of how to move forward in the near term.
James Hyerczyk
U.S. Stock Index Futures

The major U.S. stock indexes closed marginally higher on Thursday in a lackluster trade as investors waited for solid news on a hoped-for “Phase One” agreement between the United States and China before the latter gets hit with a fresh round of tariffs on December 15.

Helping to underpin the markets were upbeat comments from President Donald Trump and Treasury Secretary Steven Mnuchin that the trade negotiations between the two economic powerhouses are “on track” and “going well.”

In the cash market on Thursday, the benchmark S&P 500 Index settled at 3117.43, up 4.67 or +0.15%. The blue chip Dow Jones Industrial Average finished at 27677.79, up 28.01 or +0.10% and the technology-based NASDAQ Composite ended the session at 8570.70, up 4.03 or +0.05%.

China Wants Rollback of Existing Tariffs

For weeks, investors have been told by China that a successful outcome of the “Phase One” agreement hinges upon the U.S. rollback of existing tariffs.

Beijing’s top priority in any phase one trade deal with the United States is the removal of existing tariffs on Chinese goods, China’s Global Times newspaper reported on Sunday.

“Sources with direct knowledge of the trade talks told the Global Times on Saturday that the U.S. must remove existing tariffs, not planned tariffs, as part of the deal,” according to the report.

Global Times, published by the official People’s Daily newspaper of China’s ruling Communist Party, also cited another unidentified source close to the talks as saying U.S. officials had been resisting such a demand because the tariffs were their only weapon in the trade war and giving up that weapon meant “surrender.”

Mixed News on Trade Driving This Week’s Price Action

This week’s strong price swings to start December have been sparked by mixed news on trade.

President Trump contributed to the price slide on Tuesday when he said he could wait until after the 2020 election to make a deal with China and after the Chinese said they wanted tariffs removed as part of a phase one trade deal.

On Wednesday, the major averages snapped a three-day losing streak after Bloomberg News reported, citing sources, that both countries were inching closer to securing an agreement on the amount of tariffs that would be rolled back in a limited trade deal. President Trump also said Wednesday that he believed trade talks with Beijing were going “very well.”

It Could All Come Down to What Happens on December 15

Traders are saying the markets could whip back and forth until we see what happens on December 15th to get some sort of clarity in terms of how to move forward in the near term.

China and the U.S. have 10 days to reach a trade deal before additional U.S. tariffs on Chinese goods takes effect. Those levies would target an additional $156 billion in Chinese goods.

“Unless there’s a deal announced in the next week and half, or the U.S. unilaterally decides to delay or cancel the next scheduled set of tariffs, we’re going to have more of these kicking in,” said Brian Nick, chief investment strategist at Nuveen. “That’s not at all priced into the market.”

“In fact, expectations that those tariffs will be removed along with the October ones has been one of the reasons we’ve been able to melt up so quickly,” Nick said.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.