Whatâs Going On Here?The US and China reached a truce late last week, bringing a trade war thatâs rattled markets for almost two years closer to a resolution. Phew. (Tweet this) What Does This Mean?Under the truce, the US has agreed to cut existing tariffs on roughly $110 billion of Chinese goods in half â though itâll keep a separate set of 25% tariffs on roughly $250 billionâs worth for now. But the biggest relief was the cancelation of new tariffs that had been scheduled to kick in on Sunday. China, in exchange, has committed to large purchases of American energy and farm products, as well as a host of other US-manufactured goods. And if it fails to live up to those commitments, the deal also gives the US the right to bump tariffs back up to their original levels. Why Should I Care?For markets: So long, Scrooge.
The US-China trade war has cast a long shadow over the global economy. A step toward resolution, then, should boost relieved investorsâ appetite for riskier opportunities. That might be why, when the US president first announced a deal was close on Thursday, the country's stocks hit a record high. Companies that sell consumer electronics, in particular, are feeling the Christmas cheer. Take Apple: the tariffs that were scheduled to kick in on Sunday couldâve added as much as $150 to its iPhoneâs price tag during the crucial holiday shopping season.
The bigger picture: Itâs only the beginning.
While Fridayâs agreement is being branded a âphase oneâ deal, investors are already turning their attention to phase two, especially since this agreement has only rolled back a small batch of existing tariffs. The longer those tariffs persist, the more uncertainty thereâll be for businesses â and the bigger the toll itâll take on the global economy. Maybe thatâs why US stocks initially fell in response to the news on Friday⌠| 