Global futures rose this morning, with news that the Trump administration was extending the deadline for the introduction of further tariffs on Chinese imports to the US. The move was announced in two tweets from Trump, where stated: “The U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues”.
Trump further tweeted that he would set up a meeting with Chinese President Xi at his Mar-a-largo resort to conclude a trade agreement “Assuming both sides make additional progress”.
Such a resolution appears to have been somewhat anticipated by financial markets, with most equity markets rallying over the past few months, despite knowing that there was a 1st of march deadline to increase the current tariff level on a range of Chinese imports from 10 to 25 percent.
With much of the recent gains in equities being ascribed to optimism on a resolution to the supposed US-China trade war, it will be interesting to see if further gains can be maintained following its conclusion.
There is a chance that the recent announcement has already been priced into markets, and if this is the case – we may not see significant further gains despite the positive development. However, the biggest ASX listed losers of the trade war so far, certain material stocks, all appeared to rally this morning.
Using this information from a trading perspective, I would consider stocks such as BSL, SGM, S32, and perhaps even TWE as likely to outperform in the coming sessions.
Trump has been using tariffs to apply pressure to Chinese firms and the Chinese government, over what he has previously referred to as an un-level playing field on trade. Historically, Chinese firms have pressured overseas partners to hand over technology, as well as receiving government subsidisation and policy support.
Previous presidents have accepted the US-China trade imbalance and Trump has had to go some pretty extreme lengths to affect some sort of change; whether this is a long-term solution to free trade between the two nations remains to be seen.