Lack of Progress on China Trade Deal Continues to Spook MarketsPaul-Martin Foss
With less than a month to go before US tariffs on Chinese imports are set to increase, the two sides appear to be far, far away from coming to any sort of deal. White House economic adviser Larry Kudlow stated this this week that the US and China had a “pretty sizable distance to go” before the two sides could come to an agreement. And with recent revelations that there isn’t even a written draft of a trade deal for the two sides to negotiate around, Wall Street is growing incredibly nervous.
Even relying on President Trump’s legendary dealmaking ability won’t get anything done since Trump and Chinese President Xi Jinping aren’t scheduled to meet before the March 2 deadline. That has many companies scrambling to figure out how they can avoid tariffs of up to 25 percent on the products many of them rely on for their business. With such a large hit to corporate bottom lines, the effect of full tariff implementation could be catastrophic for many small- and medium-sized businesses.
While many companies will undoubtedly try to apply for exemptions from the tariffs, that only works as long as the government remains open for business. With another government shutdown looming on February 15, that could deal a major blow to the exemption process.
All of this puts paid to the stock market bulls who claim that markets are doing just fine and that 2019 will see more economic growth. The underlying fundamentals of the US economy are already weakened by heavy debt levels, and the additional blow from tariffs will send many companies into the red.
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