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Equities Under Pressure Thanks To Trade War

May 13 2019, 07:26 PM (+06) |

Equity markets have begun the week with a very heavy tone, in response to fresh comments made from both sides in the recently reignited US/China trade war.

Using his preferred platform of Twitter, the president wrote:

In a bid to alleviate some of the anxiety among the agricultural sector, Trump then added:

Trump Tactics Back in Action

Last week, Trump raised the 10% tariff on $200 billion of Chinese goods to 25%.

The move caught markets firmly by surprise, given that the two economic superpowers were just weeks away from signing a 150-page long trade deal. However, Trump reportedly grew tired of China taking too long to agree on the deal. He was also unhappy with the country’s attempts to renegotiate in the closing stages.

China Yet To Retaliate

While China has yet to announce any countermeasures, it did immediately respond last week by saying that it would retaliateFor now, the market awaits the decision of the Chinese government.

Furthermore, since China imports less than $200 billion US goods, it will be unable to match the new US tariffs. Chinese delegates were in Washington last week for a further round of trade talks. However, Chinese state media has stated that Trump’s moves have significantly disrupted negotiations.

US To Tariff Remaining Chinese Goods

Overnight, the US Trade Representative Robert Lighthizer made the following announcement:

“Earlier today, at the direction of the President, the United States increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. The President also ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.”

The moves are a typical intimidation tactic from Trump aimed at coercing China into signing a deal.

However, China has reportedly demanded that the US lift the current tariffs before any trade deal can be agreed upon. They also want the text of any deal to be “balanced” to protect the “dignity” of both nations.

For now, however, it seems that Trump is not too concerned with China’s dignity and the clock is ticking to sign a deal or invite an all-out trade war that could seriously harm world growth again this year.

Technical Perspective


The SPX500 gapped down at the open last night with price trading back below the 2856.30 March 2019 high. Price has been testing below the level over the last two weeks but has failed to print a weekly close below, so price action this week will be important The next stop on the downside is the 2816.15 level. However, given the two large bullish weekly pin bar candles of the last two weeks, there is still a risk of a reversal higher. Bears will need to see a break back above the 2877.30 January 2018 high in order to shift the near term bearish bias.

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