It is apparent that Donald and his policies now drive the stock market more than any other financial news. Donald has said that his trade tariffs and are not specifically targeting China, but includes all countries that are engaging in unfair trades with America. However, the political reality is that Washington has been China's focus.
Is Donald simply engaging his typical “Art of the Deal” negotiation, or is he really serious about stopping China’s technological advancement by targeting “Made in China 2025”? Such a
stance could prove more destructive to the bilateral relationship over the longer term than tariff hikes.
Traders and investors need to be concerned about 2 important dates which could potentially move the market. On 30 June, Donald will announce the details of the restrictions on Chinese investments and enhanced export controls. Then then, on 6 July, the US' trade tariffs as well as the Chinese's 25% tariffs on US$34bn worth of goods are due to go into effect.
This blog assumes that Donald, being the focus of the market, will not take things too far as it risks damaging the US stock market, which many Americans' wealth depend on. Today the Asia markets are bullish at the expectation of a good outcome on 30 June, after Trump had made some conciliatory comments on the nature of the coming investment restrictions.
He will now use a strengthened existing agency and national security review process to scrutinize Chinese acquisitions of American technologies. There has already been more than a hint of this market dynamic at work this week when the S&P500 recovered some of its losses on Monday after Navarro was presumably ordered to issue a less combative statement on the investment restrictions.
All posts and charts are for educational and illustration purposes only