Published: Tue, May 22, 2018
Global News | By Blake Casey

Wall St rallies as USA puts 'trade war on hold'

Wall St rallies as USA puts 'trade war on hold'

USA stocks opened higher on Monday as investors cheered an easing of trade tensions between China and the United States. Energy stocks also outperformed, rising 1% as US crude climbed 1.3% to $72.24 a barrel.

Philip Levy, senior fellow on the global economy at the Chicago Council on Global Affairs, tells VOA that while the US and China have for now avoided a tariff war, the outcome of the trade talks remains unclear. In particular, the statement the two sides issued skirted over the key issue of forced technology transfers from the United States to China. "However, despite USA pressure, it did not include any quantitative target, as China resisted the, practically nearly impossible, US demand of a reduction of $200 billion in the bilateral trade deficit".

For that to happen there needs to be fundamental and systemic changes in the trade of goods and services between the two countries.

Throughout, the looming trade war has overshadowed Trump's efforts to pressure North Korea on its nuclear program.

US Treasuries slipped, lifting yields on the 10-year note one basis point to 3.067 percent, according to Bloomberg. Nor was there any mention of limiting Chinese investment in the U.S.in order to demonstrate to Beijing that if doesn't allow USA companies to fully operate in China, America won't be open to its companies, either.

Stocks have rallied on signs progress was being made, only to fall back when the situation appeared to worsen.

Trump also suggested that the North Korea embargo is showing cracks before the nuclear summit with the USA scheduled for June 12.

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"When you potentially take $150 billion of tariffs off the table, that's going to drive the market", said Jason Barsema, president at Halo Investing.

And in a statement that clashed with Trump's sanguine tweet, U.S. Trade Representative Robert Lighthizer seemed to warn over the weekend that attaining an unspecified agreement on agricultural products would not achieve more critical long-term goals on intellectual property.

Europe's incentives come with a threat to retaliate against the U.S. with European tariffs on American imports, including iconic items such as Harley-Davidson motorbikes and bourbon whiskey.

This would help level the playing field between China and not only the US but other trading partners that take issue with China, including European Union members. "The US will have the opportunity to reduce its trade deficit with China, while China will achieve the consistent purchase of US goods to benefit the development of the country and its people's life", it added. Republican tax cuts and spending increases are set to inject fiscal stimulus into the USA economy that will stoke demand for foreign-made products. Bob Davis, The Wall Street Journal's trade reporter, summed up the situation thusly: "Trump administration gets rolled by the Chinese".

Last week a House Appropriations subcommittee approved a measure that would block the Commerce Department from lifting a seven-year ban on ZTE's ability to purchase US supplies. The prospect of an escalating trade war has shaken financial markets and alarmed business leaders. The U.S. has long accused Beijing of secretly stealing U.S. technology from American businesses. That project calls for China to develop world-class competitors in fields from information technology to electric cars to pharmaceuticals.

In the short term, analysts said they expect stocks to continue to trend higher barring a major negative event. "They care about one thing, and that's Made in China 2025".

"Do we really want to live in a world where we're a third-world natural resource exporter, while the Chinese are the powerful technological machine?"

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