The three major U.S. stock exchanges surged Monday after President Trump agreed to delay further tariff increases on Chinese goods and instead continue talks on a comprehensive trade agreement.
The blue-chip Dow Jones Industrial Average rose 289 points or 1.1 percent, paring earlier gains in New York trading. The tech-heavy Nasdaq climbed 1.5 percent, while the broader S&P 500 added 1.1 percent as Trump’s deal at the G-20 summit in Buenos Aires eased pressure on U.S. markets that had begun gyrating amid concerns that a trade war between the world’s two biggest economies would hurt global growth at the same time the Federal Reserve is raising interest rates.
The three-month truce “exceeded our expectations and provides a much-needed respite for for markets, though the risk of a failure to these talks remain high,” said Chris Krueger, an analyst with Cowen Washington Research Group. “Unrealistic expectations can easily lead to backlash later, though for now we have a pause that should be market-supportive.”
As part of the agreement with President-for-life Xi Jinping, the White House said it will not increase tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent, a move planned for early 2019. China also agreed to purchase a substantial amount of agricultural, energy, and industrial products from the U.S., the Trump administration said in a statement.
Washington and Beijing also plan talks on a comprehensive deal to address the more significant issues between the two countries, including theft of intellectual property by China.
Trump praised his progress Monday morning by saying “very good things” will happen as a result.
My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!
— Donald J. Trump (@realDonaldTrump) December 3, 2018
In advance of the meeting, U.S. companies were preparing for a worst-case outcome that could have also included not only a bump in existing tariff rates but new levies on $267 billion more in Chinese products.
Many companies had begun increasing imports from the country in anticipation of higher duties and trying to negotiate lower prices with Chinese vendors.
Stocks for U.S. carmakers climbed after China agreed to lift tariffs on automotive imports. Ford Motor Co. rose 3.9 percent to $9.78 in New York trading, while General Motors — which last week announced thousands of layoffs and production cuts — added 2.3 percent to $38.83. Fiat Chrysler increased 3.2 percent to to $17.13.
Late Sunday evening, Trump tweeted that China agreed to cut 40 percent tariffs on cars coming into China from the U.S. While Xi slashed duties on imported cars earlier this year, China imposed new levies on American shipments in retaliation for Trump’s trade tactics.
