Why Stock Markets Remain High after Chinese Tariffs
Even though the Chinese government has imposed retaliatory tariffs against the United States, the US stock market was elevated on Wednesday.
The US and China are engaged in a trade war, instigated by President Donald Trump. He instituted 10% tariffs against China on all imported goods, and the Chinese government responded by imposing similar tariffs against several key US imports.
The stock market initially fell on Tuesday as the trade war began, but it has since recovered and stayed high throughout Wednesday’s trading. It looks as though the initial fears of the trade war have subsided and that the stock market may not take much of a blow. The real impact will be felt on the commodities market, since that is where China has focused its tariffs.
The Dow Jones gained 0.71% as trading closed on Wednesday. The S&P 500 climbed by 0.39%, and the Nasdaq Composite added 0.19%. While these gains were not significant, the state of the stock market was much healthier than what many investors and analysts expected following a tit-for-tat tariff war with China.
Why the Stock Market Is Elevated
So, how can the US stock market indices still show gains after China has kept the tariff war going? It helps that Canada and Mexico both gave into President Trump’s demands for greater border security and that Trump did not have to impose the threatened tariffs. If that had not happened, we might not have such a strong stock market at the moment.
It also helps that China is not imposing a tariff on all imported US products and is instead focusing on several commodities. In addition, Trump has not imposed the very high tariffs that he initially threatened and has settled for a tolerable 10% tariff.
In other words, even though a trade war is raging, it is not nearly as bad as it could be, and economists are hopeful for the future. On the Chinese side, though, foreign investors are backing away from the stock markets there as those markets are being hit hard by the tariffs.
ABOUT THE AUTHOR
See More
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals
Top Broker