The trade wars between China and the US have been affecting the US economy, and specifically the stock market, more than many people had expected. While the US markets have been doing great over the past weeks, Monday saw a decline in the rate of trading. The slowing of trade is the result of the market participants expecting the trade talks between the two sides to resume on Tuesday. The current trade war has been having a negative effect on the US manufacturing and exports industries. The current state of the trade talks has not inspired any hope in the easement of the tariffs that have been affecting the industries negatively. Traders and companies alike are trying to abstain from forming opinions ahead of time, and are instead waiting for actionable decisions that will be made by the leaders of the two counties.
The trade war is slowing the economy
It is no secret that the world has been facing a global economic slowdown that has not been seen in about a decade. This is to be expected to happen as two of the largest economies of the world go toe to toe against each other. But, the wars have been affecting both of the economies quite negatively, slowing the Chinese economic growth for the first time in a long time. The US is not looking too good either, as the data shows that consumer spending is decreasing and signs of a recession are getting stronger by the day. So much so, that the Federal Reserve has decided to start cutting interest rates in order to encourage companies and consumers alike to spend. This same trade war has been having a rippling effect on the rest of the world as well, driving the EU and other relatively large and healthy economies into a dangerous stall.
The effects of the trade war on manufacturers have been some of the most obvious, with the automotive industries facing the most hardship as the trade war continues. The largest companies in the US, part of the S&P500 have all been waiting for the final decision on tariffs that have been choking the markets for a while now. According to O’Reilly automotive, the car parts manufacturer had to adapt to tariffs by increasing the prices of the goods they produce. The same goes for a number of other large manufacturing companies around the US, with all of them mentioning tariffs as the main issue of the trade talks, and the issue they want to see a conclusion to.
Still, the companies have been managing to adapt fairly to the current trade wars. 70% of them have been performing better on the international markets than the companies had anticipated they would be by this point in the year. Around 66% of the companies also reported that they are performing better than anticipated on the domestic markets as well. This inspires confidence that the consumers do want to continue spending their money, but the confidence in the markets is quickly waning as the trade wars continue.
No confidence in the trade wars
The trade talks are going to be resuming in Shanghai today (Tuesday, 7/30/2019). Many eyes and ears are turning towards this part of the world, expecting something productive to come from the discussions of the future alterations to tariffs and trade talks. And while China and the US both have been looking favourably on easing the trade sanctions for both sides, especially on soy and medical products, there is little confidence in a positive outcome. The track record of the talks shows that while the two sides might be looking to figure out a way to solve the issues, there are certain specifics that are causing them to disagree and refrain from concluding the trade wars.
This lack of confidence can be directly blamed for the US markets slowing down on Monday. But hope remains that things will be changing soon enough, and the trade talks will be producing a more favourable outcome for the entire world.