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U.S.-China Trade Talks Take Center Stage This Week

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The U.S.-China trade war has been out of the headlines lately as the two sides pursue private negotiations against a March 1 deadline for new higher U.S. tariffs on Chinese goods. That’s about to change, according to this article.

The stock market rally last Friday was widely attributed to dovish talk from Fed Chair Jay Powell and the strong December jobs report. But a third catalyst for the rally was some favorable movement in the U.S.-China trade impasse.

The trade war began in January 2018 when Trump announced tariffs on solar panels and appliances mainly aimed at the Chinese. Events escalated rapidly from there to the point that reciprocal Chinese and U.S. tariffs now apply to over $300 billion of traded goods. A new round of tariffs was scheduled for Jan. 1, 2019, but in early December the two sides declared a 90-day truce until March 1, 2019, to allow for negotiations.

Not much happened in December, but the trade talks are set to get serious this week. Wall Street rallies on each positive leak and then pulls back when the talks appear stalemated. We’ll probably see a lot of both between now and March.

The likely outcome is some modest concessions on tariffs and an extension of the truce to allow more time to work on the tough issues, like theft of intellectual property by China. That result is a mild positive for markets, but the difficult talks and a potential breakdown are yet to come.

One thing investors can count on is continued volatility as the trade talks ebb and flow.

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