Trump's first term shows why markets are cautious on the China trade deal
The stock market was largely unmoved by the trade agreement the US struck with China.
Market pros say investors expect the trade war to unfold much as it did during Trump's first term.
The US and China made scant progress on key issues in their 2018-2019 trade dispute.
The stock market has been encouraged by easing tensions between the US and China in recent weeks, but investors were largely unmoved by the announcement of a trade deal between the superpowers on Tuesday.
US stock futures failed to climb on news of the deal late Tuesday evening. While markets are edging higher on Wednesday, that's largely because the consumer price index report for May showed inflation was tamer than expected at 2.4% year-over-year.
Here's where major indexes stood at 10:20 a.m. ET:
S&P 500: 6,055.26, up 0.28%
Dow Jones Industrial Average: 42,997.65, up 0.31% (+130.78 points)
Nasdaq Composite: 19,788.36, up 0.37%
On the trade front, observers say it's looking more likely that the trade war will shake out like it did during President Donald Trump's first term, with talk of constructive deals even as tensions remain elevated.
Simply put, investors see a long and winding path ahead, and knee-jerk reactions to trade announcements have largely subsided since the chaos of "Liberation Day" in April.
The framework agreement announced on Tuesday outlines how the two nations will continue trade talks. Importantly, it involves China allowing exports of rare earth minerals, while the US eases up on restrictions for exports of advanced tech to China, like semiconductors.
This embedded content is not available in your region.
The reaction is far more muted than how the market reacted last month, when stocks popped after the US struck a rough framework deal with China that lowered tariffs between the nations for 90 days.
Art Hogan, the chief market strategist at B. Riley Wealth, told Business Insider that markets are reacting to trade talks similarly to when the US-China trade war first kicked off in 2018. He pointed to regular pullbacks in stocks during Trump's first term as traders digested the lack of progress in US-China negotiations.
"We still have that muscle memory from Trump 1.0, that dealing with China is difficult and there's a multitude of issues," Hogan said. "I don't think we're going to solve this in short order and likely never solve it in the longer term."
He added that markets are likely waiting for a more positive catalyst, pointing to more than 100 nations that have yet to strike a trade deal with the US.
Peter Berezin, the chief global strategist at BCA Research, said the framework made only small progress on negotiations with China.
"I would say that the 'deal' in London simply restores things to how they were right after Geneva," he told BI in an email. He added that he expected tariffs on China to remain high "for the foreseeable future."
Strategists at Deutsche Bank also said that tariff talks appear to mirror the 2018-2019 period, when the US and China didn't make much headway in resolving key issues.
Back then, the US said that China had unfair trade practices related to industries like agriculture and manufacturing. It also said China had unfairly transferred technology and stolen intellectual property from the US.
Deutsche Bank pointed out that the agreement announced Tuesday skipped over fentanyl-related tariffs that Trump implemented against China earlier this year.
"So while the mood music has stayed positive, investors may be wary of the pattern that emerged during the previous US-China trade talks in 2018-19," strategists wrote. "So there's perhaps a little disappointment this morning that we haven't yet got a bigger announcement."
The agreement also appeared to lack detail that markets were looking for, David Morrison, a senior market analyst at Trade Nation, wrote in a note.
"The big question is what kind of trade deals can the US negotiate that will be good enough to get the indices to fresh records?" he said.
US stocks have whipsawed this year amid the turmoil surrounding tariffs and incremental news of trade agreements between the US and other countries.
Indexes have erased their steep losses since the April 2 tariff announcements, with major averages now positive year-to-date.
Read the original article on Business Insider
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNBC
29 minutes ago
- CNBC
An Israeli attack on Iran could send oil prices above $100 as tensions mount
Beset by near-universal bearish outlooks just a month ago, oil prices could spike to more than $100 a barrel in the event of an Israeli attack on Iran, some analysts are warning. Crude prices spiked as much as 5% overnight — before paring gains — on fears of military escalation between Iran and Israel as President Donald Trump announced the withdrawal of some U.S. personnel from embassies and bases across the Middle East. The front-month August contract for global benchmark Brent crude was trading at $69 per barrel at 3:20 p.m. ET on Thursday, while the front-month July U.S. WTI contract was at $67.7 per barrel. "They [U.S. military personnel] are being moved out because it could be a dangerous place and we will see what happens... We have given notice to move out," Trump told reporters on Wednesday. The Pentagon has ordered the withdrawal of troops and non-essential staff from embassies in Baghdad, Kuwait and Bahrain. The jury is still out as to whether the moves are a pressure play ahead of upcoming U.S.-Iran nuclear talks, or whether the U.S., Israel and Iran are truly on the verge of conflict. The geopolitical risk premium is "already at least partially reflected in current oil prices," according to J.P. Morgan's global commodities research team, citing Brent crude trading at just under $70 a barrel, already above its model-derived fair value figure of $66 for June. "This suggests an elevated 7% probability of a worst-case scenario, where the price reaction is exponential rather than linear, with the impact on supply potentially extending beyond a 2.1 mbd (million barrels per day) reduction in Iranian oil exports," the bank's research team wrote in a note published Thursday. Iran is OPEC's third-largest crude producer. Israel appears ready to attack Iran, according to reports citing U.S. and European officials, and Israeli Prime Minister Benjamin Netanyahu has been pressing Trump to allow strikes. But the American president said in late May that he had warned Netanyahu against attacking Iran while negotiations with Washington were under way. U.S. Middle East envoy Steve Witkoff is currently set to meet with Iranian Foreign Minister Abbas Araghchi in Oman on Sunday for a sixth round of negotiations. Strait of Hormuz in focus Oil traders are focusing on the potential of a wider conflict shutting down the Strait of Hormuz, a critical chokepoint through which 20% of the volume of the world's total oil consumption passes daily. The British Navy on Wednesday issued a rare warning to ships in the region, saying it had "been made aware of increased tensions within the region which could lead to an escalation of military activity having a direct impact on mariners." It urged caution for vessels transiting "the Arabian Gulf, Gulf of Oman and Straits of Hormuz." Beyond that, J.P. Morgan warned, "a more general Middle East conflagration could ignite retaliatory responses from major oil producing countries in the region responsible for a third of global oil output." "Under this severe outcome," the bank's analysts wrote, "we estimate oil prices could surge to the $120-130/bbl range." Even before the latest uptick in tensions, some oil industry watchers were already making bullish calls despite a flood of announced OPEC+ supply coming onto the market, and lower global growth and demand forecasts due to trade and tariff tensions. Josh Young, founder and chief investment officer at Houston-based Bison Interests, told CNBC in late May that physical markets are more tightly supplied than previously thought, and with several oil rigs in the U.S. shale patch coming offline just as the U.S. summer driving season begins, markets should be preparing for Brent crude at $85 a barrel. "The pure inventory versus consumption would indicate $85 [per barrel], which is way higher than where we are right now. It's almost uncomfortable to say that, but that's the current price implied by inventories," Young told CNBC's Access Middle East. He cited his forecast figure as "fair value," arguing that "typically, you go from too cheap to too expensive. So I don't think we should be ruling out $100 oil this year. And I think if there is a geopolitical risk, it could get even higher." Without the geopolitical risk premium — namely, a conflict with Iran — Young still sees crude coming up to the $80 to $85 per barrel range, particularly in the event of trade deals being reached and Trump's tariffs being lowered. The outlook is boosted by this month's forecast from the U.S. Energy Information Administration, which sees a decline in U.S. oil production for the first time since the Covid-19 pandemic due to slower drilling activity and a declining rig count. Such bullish forecasts are certainly not the norm, however. Without a military attack on Iran, J.P. Morgan's base case for oil "remains in the low-to-mid $60s oil for the remainder of 2025, and $60 in 2026." Goldman Sachs also maintains an oil price forecast in the $50 to $60 per barrel range for this and next year, despite noting an improving demand picture, downside risks to U.S. supply and geopolitical tensions. The recent rise in inventories due to OPEC+ output increases, "supports our cautious oil price forecast, with Brent expected to average $60 for the rest of 2025 and $56 in 2026," the bank's commodities team wrote. "However, small misses in OPEC+ supply suggest that lower-than-anticipated spare capacity represents an upside risk to our price forecast."
Yahoo
30 minutes ago
- Yahoo
The Rare Earth Trap: How China Could Cripple America's Tech and Defense in One Move
China may not have Silicon Valley, but it controls the minerals that make Silicon Valley run. From electric motors to missile systems, rare earth elements are the silent backbone of modern techand Beijing owns the playbook. In 2024, China produced 270,000 tons of rare earthsabout six times more than the it dominates global refining. When trade tensions flared again, Beijing didn't just talk tough. It added seven rare earths to its export control list, causing headaches for American manufacturers. Tesla (TSLA) flagged rare-earth magnet shortages as a bottleneck for its humanoid robot, while Ford was forced to idle a major Chicago plant due to supply disruptions. Warning! GuruFocus has detected 6 Warning Sign with MP. The pressure doesn't stop at consumer goods. The F-35 fighter jet alone requires over 900 pounds of rare earths. And yet, the U.S. has just one major rare-earth mineMP Materials' (NYSE:MP) Mountain Passand almost no refining capacity. Trump, aiming to break China's chokehold, invoked emergency powers in March to accelerate domestic mining and processing. He followed up with an investigation into the national security risks of mineral imports, with recommendations expected within 270 days. Still, even fast-tracked projects could take years, and in the meantime, tariffs could drive up prices for the very materials U.S. companies depend on. China's control runs deep. It can approveor delayexport licenses without explanation, leaving global supply chains exposed. The message is clear: if the U.S. wants to restrict chip exports, China can slow-roll the magnets that drive EVs and missiles. Trump has floated Greenland and Ukraine as alternative sources, but neither has proven, scalable capacity. Rare earths aren't rarebut reliable supply chains are. And as the trade war evolves, the world is learning that dominance in materials might be more powerful than dominance in manufacturing. This article first appeared on GuruFocus.
CBS News
36 minutes ago
- CBS News
Trump to attend energy and innovation summit in Pittsburgh
President Trump will visit Pittsburgh to attend the inaugural Pennsylvania Energy and Innovation Summit next month. Pennsylvania U.S. Sen. Dave McCormick is spearheading the summit at Carnegie Mellon University on July 15. McCormick's office announced that Mr. Trump will attend the summit, which will bring together leaders in energy and artificial intelligence as well as investors, labor and trade leaders and government officials. Mr. Trump just visited Pittsburgh at the end of May to talk about the U.S. Steel-Nippon deal and announce tariffs. "There's no question that the path to American energy dominance runs directly through Pennsylvania, and this Summit will celebrate all our Commonwealth has to offer," McCormick said in a news release. "Harnessing Pennsylvania's unique strengths to attract new data center investment and energy infrastructure development will jumpstart Pennsylvania's economy, create great, new jobs, and bolster our national security." The news comes after the Shapiro administration on Monday announced that Amazon will pump $20 billion into Pennsylvania to create high-tech cloud computing and artificial intelligence innovation campuses. Gov. Josh Shapiro said it's the largest private sector investment in the commonwealth's history. McCormick says that Pennsylvania's natural gas resources, skilled workforce, access to water and research institutions make the state "a logical base" to power America's technological future. "The Pennsylvania Energy and Innovation Summit will align the leading energy companies, the most innovative AI platforms, global investors, and labor and trades behind President Trump's agenda to unleash American energy potential. Together, we can usher in a new age of energy production and power the AI and technological revolution. I am grateful to President Trump for announcing he will join us in Pittsburgh," McCormick said in the news release.
