President Trump didn’t want to go. But the ten-year-old G20 Summit is a big deal. Twenty of the biggest economies get together and discuss issues that might impact future global trade and economic stability. Mr. Trump is not a big fan of global trade unless the United States has the upper hand in importing and exporting. His knee-jerk trade war with China shows trump’s disdain for current trade agreements.
Mr. Trump believes China’s attitude and policies toward trade hurt the United States. That’s not the way some economists describe China’s trade relationship with the U.S., but Trump needs to justify his America First plan, and China’s strong economy gives him that justification.
Mr. Trump had to meet Chinese president Xi Jinping at the G20 Summit. His trade war with China put investors on notice. And that notice scared Wall Street. The stock market doesn’t react well to global friction. And Trump’s trade war is global friction personified. Investors wanted to know if Trump would follow through a put a 25 percent tariff on all Chinese exports as of January 1st. If that happens, consumers will bear the brunt of the tariff. Investors will run from the stock market, and they will try to find assets that protect them.
When the news that Trump and Xi called a truce to the trade war, stock market futures came alive. The Monday after the G20 Summit should produce a Dow Jones Industrial Average gain of more than 500 points. Trump didn’t reduce the 25 percent tariff on the Chinese exports he identified in the first round of duty increases. And the two leaders set a 90-day time limit to come to a permanent trade agreement. If the two countries can’t agree in 90 days, Trump will add the 25 percent tariff on the rest of the goods China exports to the U.S.
The truce between China and the United States is more about keeping the stock market stable than resolving trade issues, according to some news reports. The trade war is just one issue that has investors nervous. Most economists think a recession is peeking through the interest rate hikes, Brexit debacle, and a stock market that has more bear tendencies that bull strength. This new deal between China and Trump bought Trump a little time. He needs time to address the claims the Mueller investigation has about his connection with the Russians before, during, and after the 2016 campaign.