Stocks: Wall Street believes China is winning Trump’s trade war
- Wall Street is bullish on US stocks this morning With S&P 500 futures rising strongly, in pre-sale. Traders seem to believe that Trump will eventually have to make a trade deal with China that keeps rare earth materials and artificial intelligence chips flowing between the two countries. New export data from Beijing shows that Trump’s tariffs have surprisingly been beneficial to China, with its trade with the rest of the world offsetting its losses to the United States.
S&P 500 futures rose strongly this morning after the index fell 2.71% on Friday, when investors reacted with dismay to President Trump’s threat to impose a new set of 100% tariffs on China. The reversal in favor of optimism this morning suggests that investors are thinking now Trump will eventually go away Washington and Beijing will reach an agreement.
Trump may have no choice: China has an unexpectedly strong hand in the trade war, and the US tariffs have been unexpectedly positive for China.
Chinese exports rose 8.3% in September year-over-year, according to RBC’s Peter Shavrik, up from 4.4% the previous month. The increase exceeded analysts’ expectations. Although China’s exports to the United States fell by 27% year-on-year, exports to Europe and Asia rose sharply as other countries benefited from the United States’ withdrawal from the Chinese market. For example, trade with Africa rose by a whopping 57%.
“The biggest surprise was that imports rose to a 17-month high. This resilience shows that China has boosted trade with the rest of the world amid US protectionism,” ING’s Lin Song told clients this morning.
She also noted that while the prices of imports into the United States rose due to tariffs, the prices of Chinese goods rose He fell For the rest of the world: “Trade volume generally exceeds growth in trade value, indicating that export prices have generally fallen due to intense competition.”
Trump’s tariff threat came after China announced that it would impose controls on rare earth metals to the United States. China controls up to 90% of the rare earth elements market, and the West needs these minerals for everything from high-powered magnets, defense equipment, and semiconductor computer chips. Trump had previously imposed export restrictions to China on Nvidia’s high-end AI chips.
With the two countries seemingly at an impasse, and China potentially getting the upper hand, investors bailed out US stocks on Friday. By Sunday, Trump apparently felt he needed to calm everyone’s nerves Post on social truth: “Don’t worry about China, everything will be fine! The well-respected President Xi has had a bad moment. He doesn’t want a depression for his country, and I don’t want that either. The United States wants to help China, not hurt it!!!”
There is good reason to believe that Trump and Xi will eventually work things out. US tariffs on China (currently suspended) will not actually take effect until November 10, and Trump and Xi will attend the Asia-Pacific Economic Cooperation summit starting on October 31. Trump loves to make a deal, especially if he can do it face-to-face.
“There is still plenty of time for negotiations, and I suspect the market will start pricing in a reasonable possibility of a deal once the initial shock fades,” Deutsche Bank’s Jim Reid told clients in a note this morning.
Here’s a quick snapshot of the markets before the opening bell in New York this morning:
- Standard & Poor’s 500 futures It rose 1.33% this morning. The index closed down 2.7% in its last session.
- Stokes Europe 600 It rose 0.4% in early trading.
- FTSE 100 index in the United Kingdom It was flat in early trading.
- Japan’s Nikkei 225 Decreased by 1.01%.
- China CSI 300 Decreased by 0.5%.
- South Korea Cosby Decreased by 0.72%.
- India stylish 50’s It fell by 0.19% before the end of the session.
- Bitcoin It decreased to $115.4 thousand.
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