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THE NEW TRADE AGREEMENT / TARIFF PAUSE WITH CHINA:
As of early this morning, the United States and Chinese Officials have agreed to pause most tariffs – and other trade barriers – for 90 days. In terms of the details, the United States agreed to lower tariffs on Chinese Goods from 145% down to 30%, and China will reduce their tariffs from 125% down to just 10%.
However, keep in mind that tariffs are still higher than they were before Liberation day, and that this agreement is only for the next 90 days. Therefore, there’s a chance we return to higher levels from here, although – at this point, it seems promising.
China just went on record to say that “It is hoped that the U.S. will build on the foundation of this meeting, continue to work in the same direction with China” and “completely correct its unilateral tariff practices.” In response to that, the US Treasury Secretary said: “I would imagine that in the next few weeks, we will be meeting again to get rolling on a more fulsome agreement” – and that, we could always return to April 2nd levels (at 34%).
Essentially, this 90-day pause gives them time to construct a more broad – and comprehensive – plan, but it also suggests that, in terms of China, the worst is likely behind us.
Although – we’re not completely done with tariffs / negotiations in the near future. After the deal this morning, Trump said that “The European Union is nastier than China,” noting that “About 750,000 cars were exported from the EU to the U.S. last year, against about 170,000 cars exported from the U.S. to Europe.” We also trade about $1 Trillion dollars per year with the European Union, making them one of our BIGGEST trading partners – so, there could be a round 2 (who knows, this situation changes so often it’s hard to keep track).
Realistically, all this means is that tariffs are still remaining in place, they are lower than the worst case scenario, and it’s a positive sign that both sides are openly communicating and coming to a general agreement. But, it’s still not over, we’ve got a long way to go, and if US companies are expected to manufacture more products locally, it’s going to take a lot longer than expected.
Honestly, it worries me when markets are moving SO MUCH ON a “Buy The Rumor, Buy The News” mentality that, nearly any scenario gets instantly priced into the market, for better or worse, even as Trumps reiterates that “China Tariffs Will Go Up Without A Deal.”
That’s why, it’s probably best just to create a realistic plan, stick with it, and don’t get caught in the hype or fear, either way. Hope this helps!
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