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Wall Street appears to be lowering the odds of an all-out trade war with China amid reports that the U.S. and Beijing are in negotiations to work through their trade differences and avoid a prolonged fight that could harm the global economy.
In early trading Monday, the Dow Jones industrial average was up 400 points, or about 2%. At its high, it rose more than 500 points.
Last week, the blue-chip average tumbled more than 1,400 points, or 5.7%, as traders reacted to President Trump’s proposal to levy up to $60 billion on tariffs on Chinese imports, and Beijing retaliating with threats of slapping $3 billion in import fees on a small list of U.S. goods.
Wall Street appears to be again trading on the thesis that the tit-for-tat tariff announcements by the world’s two largest economies was more about negotiating tactics, rather than a true desire of the U.S. or China to transform the trade skirmish to a more aggressive level.
“The (rally) to the upside this morning was off of the rumor and news that the U.S. and China were in negotiations to open up markets,” says Gary Kaltbaum, president of Kaltbaum Capital Management.
Like many money manager, Kaltbaum says last week’s talk of a trade war were overdone and that both countries are aware that a trade fight would be harmful to both.
“It’s just a bunch of positioning back and forth,” between the U.S. and China, Kaltbaum says. “Both parties know nothing good would come from a trade war and something would get figured out. We were in hopes that cooler heads prevailed with trade reps going behind closed doors. Hopefully, they get the job done. But it is not over yet.”
Treasury Secretary Steven Mnuchin told Fox News this weekend that the U.S. is trying to reach a deal with China.
And The Wall Street Journal, citing people familiar with the matter, reported that the U.S. and China have quietly started negotiating to improve U.S. access to Chinese markets.
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