The SPDR S&P 500 ETF Trust SPY is down more than 3 percent in the week since President Donald Trump said the U.S. would more than double tariffs on $200 billion in Chinese imports from 10 percent to 25 percent. That tariff hike went into effect at midnight Friday, and Trump has posted 15 tweets as of the time of publication Friday morning, most of which addressed the China situation.
Trump’s Tweets
At 6:43 a.m. EST, Trump began a series of tweets, writing that trade talks with China “continue in a very congenial manner - there is absolutely no need to rush.”
Trump followed up by tweeting that the United States will use the money it takes in from the additional tariffs to buy “agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance.”
Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!
— Donald J. Trump (@realDonaldTrump) May 10, 2019
Trump then suggested that if the U.S. buys $15 billion in agriculture from American farmers, it would then have $85 billion left over to spend on infrastructure, health care or other high-priority issues.
“China would greatly slow down, and we would automatically speed up!” Trump said. China has said it will enact “necessary countermeasures” to the new U.S. tariffs but has not provided details.
Muted Market Reaction
Despite the seeming escalation of the trade war, global markets traded higher Friday morning, including a 3-percent gain by the Shanghai composite.
Deutsche Bank analyst Jim Reid said in a Friday note that investors are still optimistic that a trade deal will be reached in the near future.
"Investors seemingly continue to try to cling to hope that policymakers on both sides opt to de-escalate," the analyst said.
With trade tensions rising in the past week, the iShares FTSE/Xinhua China 25 Index FXI is down 7 percent, while the CR SUISSE AG NA/VELOCITY SHS SHORT VIIX is up 23.1 percent.
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President Donald Trump disembarks Marine One at Joint Base Andrews on Wednesday, May 8. White House photo by Joyce Boghosian.
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