Arthur J. Villasanta – Fourth Estate Contributor
Washington, DC, United States (4E) – Wall Street fell off a cliff yesterday, losing 3% or more of its value after president Donald Trump confirmed nothing much had changed following his meeting with Chinese president Xi Jinping on Dec. 1.
Analysts agree a series of demoralizing tweets by Trump indicating no significant progress had been made in ending his trade war against China helped ignite the massive sell-offs yesterday. American media reports the Dow Jones Industrial Average fell by 200 points after those tweets.
One particularly damning tweet by Trump boasted, “I am a Tariff Man.”
At the end of the trading day, the Dow plummeted 799 points, or 3.1%. At one point, the Dow was down 818 points. The S&P 500 lost 3.2%, while the NASDAQ shed 3.8%. It was the Dow’s fourth-biggest point decline in history.
It took only two days for the sheen to wear-off Trump’s boast China had bowed to his demands. Wall Street was initially encouraged by Trump’s deal with Xi in which both sides agreed to a 90-day truce in the U.S.-China trade war.
In a knee jerk response, all three equities markets improved on Monday buoyed by optimism the U.S. and China might strike a deal to end their rancorous trade war. The Dow gained nearly 300 points.
This flirtation with optimism quickly ended yesterday after investors realized Trump’s boasts of progress were only hot air. The sentiment is that Trump intentionally oversold his “accomplishments,” which are at odds with what other members of his administration are saying.
Uncertainty as to what Trump and Xi really agreed upon indicated to investors that no one seems to know exactly what’s going on, and this temporary trade war truce is no guarantee of any substantive progress in the future being made.
Trump’s series of tweets also show he has no problems with re-igniting the trade war if a broader agreement on his terms isn’t reached in the next 90 days.
It also didn’t help investors that Trump’s boasts turned out to be only boasts devoid of any reality. Trump claimed China had agreed to slash its current 40 percent tariffs on U.S. auto imports to zero. He also claimed China will “start purchasing agricultural product immediately.”
On the other hand, National Economic Council Director Larry Kudlow refused to confirm any of these boasts.
Kudlow acknowledged there was no “specific agreement” on auto tariffs. He also said he couldn’t “specifically” answer questions about China’s agricultural product purchases. He said his “expectation” is that China might roll back tariffs on goods “quickly.”
Kudlow and Trump also disagreed on when this 90-day trade war truce will begin. Kudlow said it starts Jan. 1, 2019; Trump demurred, saying the clock started ticking on Dec. 1.
“The trade war between the United States and China has been put on hold for the holidays, but the respite will be brief given the 90-day deadline and inherent difficulty in addressing the fundamental factors driving trade tensions between the two countries,” said Isaac Boltansky, an analyst at research firm Compass Point LLC.
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