Over the last two years, tensions between the world’s two largest economic superpowers have intensified. After back and forth tariffs between the United States and China, the two countries could have a deal in the works. The trade war thus far has resulted in a volatile market. Even the slightest mention of China from a tweet of Donald Trump’s twitter has could trigger a market frenzy. It doesn’t only stop at blue chip stocks either. All stocks, including penny stocks, could be waiting patiently for a decision to be made. For a frame of reference, earlier this week Donald Trump tweeted about doubling tariffs on China. This proceeded to result in a 450-point Dow Jones plunge.
Here is what investors have to look forward to if the potential trade deal is successful. US consumers will be looking at overall cheaper prices for their goods as the majority of tariffs are expected to be lifted once a deal is made. US companies could see higher sales in their next quarter due to Chinese consumers purchasing American made products for less. The increased buying confidence from both US and Chinese consumers should have a strong positive impact.
Economist Still Weary
The largest negative of the trade deal would be on US companies whose products can be made in China. Unemployment rates in the US will likely begin to increase. US production demand could begin to shift to China’s seemingly infinite supply of cheap labor.
If the trade deal falls through, preparation for an extremely rough market could be in store. Several economists have expressed their concerns about the global economy if the trade war continues. The main driving force of both the economy and the market is consumer faith. That faith will begin to waiver and will take the market with it. Many people are hoping that the trade deal has some mandate stating that China can no longer manipulate its currency to make its goods look more attractable. If the deal falls through, then the continuance of Yuan currency manipulation remains a prevalent threat to US producers.