Dow Jones jumps 150 points after US-China trade truce
The Dow Jones rises after the US and China reach an agreement to halt additional tariffs.
The Dow Jones surged after US President, Donald Trump, and China’s President, Xi Jinping, reached a truce in their tariff war. Trump announced the US would not impose additional tariffs on $300 million worth of Chinese imports. Trump also revealed that US corporations can continue to conduct business with Chinese electronics company Huawei.
US businesses relieved about tariff resolution and easing of Huawei ban
Trump and Xi reached an agreement not to implement additional tariffs at the recent G20 summit. Many US businesses that manufacture products in China like Nike noted that the tariff war would negatively impact their profits and raise prices for consumers. Share prices for those corporations have increased after the news of a trade resolution.
Trump also eased restrictions on US businesses selling electronic components to Huawei. He felt the trade ban was unfair to US companies that supply parts to the Chinese corporation.
‘US companies can sell their equipment to Huawei. We’re talking about equipment where there’s no great national security problem with it,’ said Trump.
Huawei is still on the Entity List of companies that are perceived as national security risks to the US. Trump also didn’t say which specific companies can work with Huawei.
Many companies that were banned from partnering with Huawei saw their revenue forecasts decline. When Broadcom noted in mid-June that losing Huawei as a client could cost the corporation $2 billion, the Dow Jones plunged. After Trump announced the lift of the Huawei ban, Broadcom and other chipmakers like Micron that conduct business with Huawei saw their stocks rise.
What do economic experts say about the Dow Jones rally?
Alec Young, managing director of FTSE Russell Global Markets Research, believes that investors are relieved about the moratorium on tariffs.
‘Stocks are welcoming a US-China trade truce at the G20 as it takes worst-case economic tail risks off the table. The biggest driver of investor relief is that the much feared 25% tariff on an additional $300 billion in Chinese imports has been put on hold as trade negotiations resume,' said Young.
'Had those tariffs gone into place, they had the potential to do significant damage to second-half consensus economic and earnings growth prospects,’ added Young.
However, financial expert Larry McDonald, says that trade volatility between the US and China could still lead to lower earnings for corporations and drag down the Dow Jones.
‘CFO [chief financial officers]’s cannot make decisions with a purgatory of uncertainty, endlessly hanging over the market,’ said McDonald.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Seize your opportunity
Deal on the world’s stock indices today.
- Trade on rising or falling markets
- Get one-point spreads on the FTSE 100
- Unrivalled 24-hour pricing
See opportunity on an index?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Try a risk-free trade
- See whether your hunch pays off
See opportunity on an index?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from one point on the FTSE 100
- Trade more 24-hour indices than any other provider
- Analyse and deal seamlessly on smart, fast charts
See opportunity on an index?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
