Resumption of a Trade War Shakes Up the US Markets

 The Story:

US stocks lost 2.9% of their value Monday, in their worst day of 2019. The Dow Jones Industrial Average dropped by 767.27 points. The fall was widely linked to the latest developments in the ongoing trade war between the US and the People’s Republic of China.

Background:

On June 29 of this year, the leaders of the two countries directly involved in the ‘war’ announced a truce, at a summit of the major industrialized nations (the G20 summit) in Japan. President Trump and President Xi Jinping said that while existing tariffs would remain in place, neither country will add to them “for the time being.” Also, the US agreed to allow US companies to do business with the Chinese tech giant Huawei,  although it is still on the US trade blacklist.

That truce has badly unraveled in the final days of July and the early days of August. The US has officially declared China a currency manipulator, and China has halted all agriculture purchases from the US. Those shots precipitated the stock market plunge Monday.

The Thing to Know:

In March 2018, President Trump tweeted, “Trade wars are good, and easy to win.” Events this year are falsifying that breezy assertion. The truce announced in Osaka has been good for the business climate in both countries, and its end may prove to be a grave misfortune.

 

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