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Home » Trade » Stock market reacts with a “meh” to today’s Chinese trade deal announcement

Stock market reacts with a “meh” to today’s Chinese trade deal announcement

PortandTerminal.com, December 13, 2019

NEW YORK – Today’s key stock market indexes opened lower and then surged after President Trump announced via Tweet that an “amazing deal” had been reached with China. At one point the DOW was up as much as 156 points shortly after the announcement, taking it to record highs.

Soon after the initial bump though the hype wore off, the details of the “deal” became clear, and investors said “no-big-deal” and the markets dropped. At one point, the markets FELL as much as 104 points early in the day and closed the session FLAT. A zero gain day on a deal the Deal Maker in Chief is calling “amazing”. What’s up?

Market’s initially spiked today on the trade-deal news, reversed into losses quickly afterwards and ended the day flat.

The bottom line is that it’s not much of a deal yet. Yes, it’s GREAT that things haven’t gotten worse as they easily could have. But this deal is more of a “Mommy and Daddy have stopped throwing plates at each other, but they’re still not getting back together yet” kind of announcement.

Here’s what each party has agreed to do:

United States

President Trump agreed to reduce some existing U.S. tariffs, halving 15% duties on $120 billion of imports but maintaining a 25% levy on some $250 billion of Chinese goods. He said he would also delay new import taxes set to take effect this Sunday on $160 billion of products such as smartphones and toys.

China

China has reportedly agreed to increase purchases of American farm goods such as soybeans and pork, and making new commitments on intellectual property and currency. Speaking to reporters in Washington, President Donald Trump said he expects China’s agriculture buying to hit $50 billion annually “pretty soon.”

Democrats quickly (and predictably) criticized the deal, with Senate Minority Leader Chuck Schumer saying Trump “sold out for a temporary and unreliable promise” from China to purchase soybeans.

Tiny China Trade Deal Seals Beijing’s Victory Over Trump; Dow Jones Steady

Investor’s Business Daily (December 13, 2019)

But Schumer’s not wrong and neither is the stock market. “Pretty soon” isn’t a deal. It’s more of a “the check’s in the mail” kind of promise. The United States has promised China immediate cuts on tariffs for a vague promise of future agricultural purchases.

There’s a Trade Deal With China. Here’s Why the Stock Market Isn’t Thrilled.

Barron’s (December 13, 2019)

The bottom line is that today’s China trade deal looks tiny and papers over serious disagreements on the central issue of whether Beijing will back its vow to buy U.S. goods with any specific dollar amounts.

So that’s why the markets today responded with a resounding “meh” to the trade deal news.

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