Amid an ongoing technological cold war and increasing tensions over Taiwan, several defining features have emerged as market trends are solidifying. President Donald Trump is planning a state visit to China. Hopefully this trip will continue to improve the dialogue between Washington and Beijing. Markets today are intently watching ongoing trade negotiation. The long awaited release of China’s trade numbers could provide a bit of relief while tensions continue to escalate.
On May 12, the two countries reached a peace deal that rolled back some of the tariffs they had imposed on each other. This likely propped up the administration’s trade-export numbers in the month immediately after. Even that is complicated, as both nations face a difficult economic climate shaped by trade war crossfire.
Upcoming State Visit and Trade Figures
President Trump is scheduled to make a state visit to China later this year. We hope this trip will lead to more in-depth discussions between the two countries. Though it is regrettably extended overdue, this visit comes at an opportune moment, as both Canada and France look to make progress on chronic trade disputes.
Next week, China will have a chance to gild the lily as they release their trade figures. This is good news for both economies if they go smoothly. Our analysts are optimistic about a short-term increase in exports due to the new-found truce established on the Korean peninsula. This has become a welcome ray of hope amid all the turmoil.
There continues to be confusion about exhortation or progress towards substantive trade negotiations. Even with recent calls between President Trump and President Xi Jinping, doubts linger regarding how quickly both nations can reach a comprehensive trade agreement. Given the complicated nature of international trade negotiations, despite the increase in dialogue, concrete results could be months away.
Legal Proceedings and Market Reactions
Along with diplomatic negotiations, major litigation looms. An appeals court will hear arguments from both sides no later than June 9. The lead case is on the tariffs raised during the trade war. The result of this court case could sway market sentiment and sink negotiations even further.
There remains the chance that the case will be further appealed to the Supreme Court, which would add even more time to any final decision. Financial markets are watching these moves with a hawkish eye. They remain vigilant on what they can do to impact fast track and tariff policy making.
Market analysts are particularly watching to see how these legal determinations interact with larger economic indicators. Analysts will be looking closely at the employment report for the three month period leading up to April. They’ll be searching for evidence of rising layoffs due to escalating trade conflict. As President Trump’s global trade war begins to deepen, many of its shortcomings are beginning to show in multiple industries. This has raised fears of a tight labor market and recession.
Economic Concerns Amidst Trade Turbulence
As tensions between the US and China persist, worries have emerged regarding the labour market’s resilience amid the trade war. The prospect of layoffs and other job losses is one of the major worries shared by economists and other analysts, as well as policymakers.
The approaching July 9 end of the current 90-day reciprocal tariff pause increases the urgency even further. Financial markets are anxiously awaiting the outcome of trade negotiations and any US appeals court decision affecting tariffs. How these discussions play out will likely decide if the US and China can prevent further economic damage from additional tariff hikes.
Recent trends paint a different picture, with consumer spending, manufacturing, and the services sector showing related signs of stress. The most recent change is tariffs, which have begun to realign various sectors of the economy. This move has raised increased attention to how effective our existing trade policies are.