Trade War Headlines Causing Uncertainty yet Again

Alan Penny

8 November 2019

3 min read


  • Tariffs likely to be pulled back eventually
  • Mixed headlines continue to be an issue
  • Internal strife at White House

The trade war continues between the Americans and the Chinese. Recently, however, there has been some optimism as both American and Chinese officials have suggested that the Americans were looking to remove some tariffs going forward.

At this point, the market has been hearing headlines that vary a bit. Some suggest that the tariffs will be gradually repealed against the Chinese in congruence with compliance, while others indicate that perhaps the tariffs will be completely dissolved. There is quite a bit of confusion which has been showing up in marketplace action across all assets.

Internal strife at the White House?

After the initial headlines hit the wires, most markets jumped into a major “risk-on” scenario, with stock markets surging higher, precious metals getting hammered, and bonds rates rising around the world rather sharply. However, later in the day, there were reports that perhaps the decision hasn’t been made in the White House to remove these tariffs, and that there was a bit of an internal battle going on between several officials.

The question seems to center around the idea of intellectual property, and the theft of it from the Chinese

One potential leader of the dissent is Peter Navarro, who is a well-known China hawk. The question seems to center around the idea of intellectual property, and the theft of it from the Chinese. This is a major issue with the Americans, and something that will probably continue to be a major sticking point between the two economies.

Weekend headlines

It’s a well-known pattern that a lot of the major headlines between the United States and China seem to come out either late on Friday or over the weekend. With this in mind, it’s very likely that the market will see a lot of noise either over the weekend or late during the day on Friday.

The headline is crucial, as it will give us an idea as to where the market goes next. Unfortunately, it’s so up in the air at this point that one of the premiums for investors and traders around the world will be protection. Because of this, volumes have dried up a bit, as sudden shocks to the system can happen at any point.

More of the same

The one thing you can probably count on is more of the same. That’s mainly because, even with the idea of some form of agreement coming down the pipeline, it’s still only “Phase 1”. This means that there are still several other issues to tackle, and most of what the Chinese are offering comes down to buying more agricultural purchases, which is something they need anyway with the outbreak of swine flu.

Soybeans are also crucial for China. It’s not a stretch to see them coming back to the United States for more, as it is by far the largest exporter of agricultural products in the world.

Unfortunately, not much will have changed by the end of the week, and it’s likely that more volatility is to be seen in markets overall. Ultimately, the headlines will drive the market’s volatility higher and lower.

For what it’s worth, the VIX is also at extraordinarily low levels, suggesting that traders have become too complacent. As it approaches the 12 handle, that normally means that the market is ready to see more volatility. One of the leading contenders for that will be news coming out of either Beijing or Washington.

Written By
Alan Penny

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