If there’s one thing we can all say about President Trump, it’s that he likes to throw his weight around and keep everyone on their toes. So, frankly, does China – which is how we got to one of the biggest market-moving factors heading into 2020: the U.S.-China trade war.
For more than a year, a pattern has kept playing out: President Trump says something to anger China, the market gets rattled, but usually by Friday he’ll do something in the other direction, then markets rally. Anytime you see volatility like this, expect Trump to come out with a positive remark before long, to make sure that the stock sell-off is brief and temporary.
Ultimately, President Trump is probably the biggest cheerleader the market has ever had. And, once it’s resolved, the trade situation sets the stage for a huge move in the stock market in 2020.
That huge move is precisely what should be guiding us at this juncture. And before we delve into that, let’s look at the origins of the U.S.-China trade war – which are still impacting us all so heavily today.
The U.S.-China Trade Dispute
The melee likely has its most recent origins in the decision by the World Trade Organization (WTO) to allow China into its club of nations that regularly conduct trade with one another. The WTO made China an official member on Dec. 11, 2001, based on concessions that it reduce its tariffs and open its market to world trade.
Over the years, businesses in the United States and elsewhere have complained about unfair Chinese trading practices, including the theft of intellectual property and the forced transfer of American technology to China for companies doing business in the country. Meanwhile, Chinese officials have accused the United States of seeking to slow China’s economic growth.
Long before he became President, Trump advocated for reducing America’s trade deficit with China and other nations by imposing tariffs on imported goods.
By July 2018, the Trump administration had begun to follow through with its threat to impose $34 billion worth of tariffs on Chinese products being sold in the United States, kicking off the trade war. China retaliated with tariffs of a similar value on American goods sold in that country.
The next month, the U.S. imposed a 25% tariff on 279 Chinese goods worth $16 billion. China quickly responded with a 25% tariff on $16 billion worth of American imports.
In September 2018, the U.S. imposed a 10% tariff on $200 billion worth of Chinese goods, and promised more if China retaliated. It did retaliate with 10% tariffs on $60 billion worth of U.S. goods. Toward the end of 2018, the two nations began discussions to resolve the trade tensions.
The situation eased for a while, but flared back into the spotlight in May 2019 when the Trump administration raised its 10% tariff on $200 billion in Chinese goods to 25%. China responded in June 2019 with a 25% tariff on $60 billion worth of U.S. goods.
And on and on.
China has since ordered its state-owned companies to stop buying $20 billion in annual agricultural purchases from the U.S. while America declared China a currency manipulator.
More tariffs were ordered on both sides.
Last month, President Trump said the two countries had come to an agreement, a “first phase” of a deal to end the tensions, and China later confirmed his description.
December 15, 2019, is the latest deadline in the trade war. On this day, the U.S. is set to impose a 15% tariff on roughly $160 billion in Chinese goods shipped to the U.S.
It’s also the date by which terms of the first phase could be established between the two nations… and send the market into an end-of-year frenzy.
What’s Ahead in 2020
At the end of the day, the United States is the biggest market in the world. That gives President Trump the most leverage in these skirmishes with China (or with Europe, for that matter)…all he has to do is use it.
And while the U.S. president has been throwing his weight around, so have U.S. stocks. November was an incredible month. S&P made 13 highs in November. It made 26 new highs this year. So half of the highs the S&P made this year were in November alone. Outside of the S&P, small-cap stocks soared on the benefit of positive seasonality and light trading volume. What’s going to happen in January with real volume?
Note: My InvestorPlace colleague, Matt McCall, and I are about to alert folks to a major market move we see headed our way in 2020. A move that will have profound implications for your retirement in the coming year, and beyond.
If Matt’s name sounds familiar, it’s because he’s one of the fastest-rising stars of independent financial research.
He’s the founder of Penn Financial Group, one of the most well-respected money management firms in America.
He’s also the author of The Next Great Bull Market, a book that predicted the massive bull run we’re in today, all the way back in 2009.
It forecasted many of the megatrends we’re now seeing unfold – like the rise of solar energy and precision medicine…
And by fearlessly grabbing hold of these trends, Matt found over 200 stocks over the past 10 years that have gone up 100% to 999%…and 16 recommendations over the 1,000% mark!
Now, Matt and I are getting together on Dec. 10 to uncover how the trade war, among other major trends, is going to affect the markets and your profits in 2020. We’re calling it the Early Warning Summit 2020.
What Matt and I are preparing to share impacts far more than just stocks.
It impacts the entire economy, your job, your financial well-being and so much more.
You really don’t want to miss out on this. Click here to sign up.