Trade War Between US, China Escalates

Increased tariffs, call for US to stop doing business with China leads to stock loss loss

Tom Puckett
August 26, 2019 - 4:00 am

Buffalo, NY (WBEN) The Dow lost 623 points on Friday after word of China issuing tariffs and President Trump's response calling on American business to stop working with China, the latest round in the trade war. 

President Donald Trump, under pressure to scale back a U.S.-China trade war partly blamed for a global economic slowdown, claimed Monday that the two sides will begin serious negotiations soon.  

"I think we're going to have a deal, because now we're dealing on proper terms. They understand and we understand," Trump said

"I think it's another shot across the bow by Trump, but doesn't have any substance, but it did roil the markets," says Glenn Wiggle of the Financial Guys. Late Friday, Trump also fired back with tariffs of his own. Was it an overreaction?  "Trump has a tendency to shoot first and ask questions later sometimes. He tends to make comments he walks back several weeks later. I think he'll likely walk this back too. I don't know if this is an overreaction, it's another shot in the trade battle in hopes of a better deal," notes Wiggle.

Wiggle says another factor led to the markets falling. The yield curve was inverted once again. The last time it happened, the Dow dropped 800 points, and Wiggle was surprised the loss Friday wasn't worse. "Definitely a lot of jitters on Wall Street when you combine some of these factors. It leads to uncertainty, and when you have uncertainty, it leads to volatility, usually on the negative side."

Wiggle predicts the trade war will continue until at least the next presidential election. "If Trump is re-elected I think you'll see (China) come to the table rather quickly and try to get some sort of a trade deal done. If Trump is not elected, the Chinese will find a more favorable partner to negotiate with in the Democrat party," says Wiggle. 

Wiggle says the US has the advantage right now with a stronger economy.

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