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As the trade war between the U.S. and China continues to rage, US stocks including the Dow Jones, Nasdaq and the S&P 500 are currently taking a hit affecting retail stocks with no current hope for recuperation.
The fires heating up the trade war between U.S. and China which has been going on for quite a long time were recently stoked with another biting round of tariffs. The United States levied a 15% extra on an estimated $110 billion worth of Chinese products in a forceful move which has come to be characteristic of the U.S.
China, however, retaliated with its own round of tariffs slapped on U.S. goods worth about $75 billion. The entire back and forth has now unsurprisingly dented U.S. stock markets as The Dow, S&P 500 and Nasdaq have begun bleeding.
The Dow Jones Industrial Average, for example, shed serious weight on Tuesday morning, dropping 425 points to a new low. It seemed to pick up momentum later in the day and by close, this number had adjusted to approximately 285.26 points, signifying a 1.1% drop at 26,118.02. The Nasdaq Composite also lost almost as much percentage weight, at 1.1%, eventually hitting 7,874.16. The S&P 500 seemed to shed the least of the three, dropping to 2,906.27, a 0.7% loss.
This recent market shake-up, if nothing at all, shows that there is a need to considerably manage the trade tensions between both countries, to prevent further deterioration. Prudential Financial’s Chief Market Strategist, Quincy Krosby, suggests that the negative market sentiment has an unmistakable effect on market health:
“That adds to the concerns on whether there is a viable path for negotiation. The market is vulnerable to these moves on misery and optimism regarding the talks.”
To make this situation a bit clearer, J.P. Morgan Chase recently estimated that the U.S. tariffs levied on Chinese goods so far has increased the average American family’s annual budget by at least $600. The bank, however, predicts that when the new round of tariffs set for December become official and begin to bite, this number will shoot to $1,000. J.P, Morgan Chase’s stocks fell 1.2% with other financial institutions falling deeper as Bank of America, as well as Citigroup, shed 1.7% and 1.5% respectively.
Several retail stocks also took a hit including Caterpillar and Boeing which both lost more than 1.5%, with Nvidia losing 2% and Skyworks Solutions losing 1.5%. According to reports, investors have started divesting into other supposedly safer assets like Treasurys. Even gold futures deliverable for the end of the year have already climbed up 1%. Furthermore, Signet Jewelers lost as much as 9.5% with Guess losing 8.1%. The SPDR S&P Retail ETF (XRT) also took a 1.5% hit. Apple has also lost 1.5%
America’s manufacturing, as represented by the Institute of Supply Management’s index hit its worst point in about 44 months since January 2016, coming in at 49.1. Any mark less than 50 on this index, distinctly means that there is a significant downturn in the manufacturing sector.
U.S. President Donald Trump, even with the renewed tariffs, still consistently suggests that officials of both countries are still planning to continue negotiations into a possible resolution that could potentially put an end to the tensions which has seen the two countries periodically placing levies on goods since the beginning of 2018.
Regardless, China has already filed a complaint against the U.S. at the World Trade Organization. According to the filing, the most recently levied tariffs shows that the U.S. has reneged on a recent agreement concluded in Osaka, Japan. This is the third time Beijing is bringing legal actions at the WTO, against the U.S.
In response, however, the U.S. has said that the tariffs represent a fine for China’s continuous theft of intellectual property, something they claim is not exactly under the WTO’s purview.
The president to the Center for China and Globalization, Wang Huiyao, has however suggested that resolution is left mostly with the U.S. According to Wang:
“It’s up to the U.S. to really go ahead and be flexible and not take a really harsh attitude on this. We cannot have a perfect deal.”