The Dow crawled toward a moderate recovery on Friday after President Donald Trump granted tariff exemptions to more than 400 Chinese products, the latest in a growing list of concessions that Washington and Beijing have exchanged in the leadup to their next round of trade negotiations.
Dow Secures Minor Recovery
All of Wall Street’s major indices advanced at the opening bell. The Dow Jones Industrial Average rose 56.74 points or 0.21% to 27,151.53.
The S&P 500 ticked 6.93 points or 0.23% higher, raising the large-cap index to 3,013.72. All 11 sectors reported gains, with none rising more than 0.48%.
The Nasdaq underperformed, edging 11.24 points or 0.14% up to 8,194.12.
Trump Exempts 437 Chinese Products from Tariffs
With the September FOMC meeting now in the books, Wall Street has once more turned its attention to the US-China trade war, which had been uncharacteristically quiet in recent days.
Both Washington and Beijing have made goodwill gestures in the weeks leading up to the next round of trade talks, and the White House continued to deescalate tensions by exempting more than 400 Chinese goods from US tariffs.
Altogether, 437 products – ranging from plastic straws to Christmas lights to swimming pool vacuum cleaner components – will be temporarily exempted from a 25% tariff that Trump imposed on $250 billion worth of Chinese imports. The exemptions will expire in either August or September 2020.
Notably, Trump did not tout the exemptions on social media, a stark departure from his typical behavior.
Analysts say that’s because these specific exemptions are less an indication that the US and China are making progress toward a trade deal and more a tacit confirmation that tariffs are hurting US businesses – and weighing down the Dow as it flirts with record highs.
CNBC notes that US companies had requested exemptions for all of these products, as well as around 700 more that have not yet received trade war reprieves.
Trump had repeatedly claimed that China would pay for the tariffs, and while it’s true that these import duties have hurt the Chinese economy more than most analysts expected, that doesn’t mean US businesses aren’t feeling the pinch as well.
Tariffs Could Spike to 100% if Negotiations Sour
Regardless, expectations remain high for the next round of high level, face-to-face negotiations, which are scheduled to take place in Washington in early October.
However, if those discussions go awry, tensions could escalate quite rapidly. Just yesterday, White House trade guru Michael Pillsbury – whom Trump called “the leading authority on China” – said that Trump wouldn’t balk at raising tariffs as high as 100% if it becomes clear that a trade deal is off the table.
Trump has been “remarkably restrained in the pressure he has brought to bear on China in the trade field,” Pillsbury said. “These are low level tariffs that could go to 50% or 100%.”
Three-Week Dow Winning Streak at Risk
Today’s mini-bump has the Dow back on course to potentially set a new all-time high within the near future, but it will need to hasten that recovery to salvage its three-week winning streak.
The DJIA must close above 27,219.52 this afternoon to extend that streak to four.
Click here for a live Dow Jones Industrial Average chart.
September 20, 2019 1:37 PM