U.S. stocks staged a comeback Friday despite higher levies slapped on Chinese imports.
The Dow Jones Industrial Average closed up 114 points, or 0.4 percent, to 25,942.37, marking a turnaround from earlier in the day when it was down by more than 350 points, with investors spooked by the administration’s midnight move to raise tariffs on $200 billion worth of Chinese imports, including handbags, to 25 percent from 10 percent.
So what led to the more positive outlook?
It appears that all it took to dampen fears of a full-blown trade war was an afternoon tweet by President Trump, which stated that the relationship between him and China’s President Xi “remains a very strong one,” and conversations between the two sides will continue.
“In the meantime, the United States has imposed tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!” he added, which investors interpreted as a positive sign that the situation may not erupt into a full-blown trade war.
It was certainly more encouraging than the series of five tweets he fired off that morning.
In those, President Trump said while talks with China continue in a very congenial manner — “there is absolutely no need to rush — as tariffs are now being paid to the United States by China of 25 [percent] on 250 billion dollars worth of goods and products. These massive payments go directly to the Treasury of the U.S.”
“Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch! In the meantime, China should not renegotiate deals with the U.S. at the last minute. This is not the Obama Administration, or the Administration of Sleepy Joe, who let China get away with “murder!” he added.
Not finished, he also disclosed that the government had started the paperwork to be able to place 25 percent tariffs on the remaining $325 billion worth of imports that have yet to be targeted, which would drag apparel and footwear into the tariff fray. While a date has not been set, the process could take several weeks and might involve hearings from those impacted on Capitol Hill.
But whatever the future may hold, for now handbag retailers have to grapple with additional tariffs. The increase means that retailers of synthetic material handbags, which already face tariffs of about 30 percent, now have to grapple with levies of 45 percent.
The accessories industry had been hoping for a last-minute reprieve, with Trump dining with China’s vice president Liu He Thursday night as part of trade negotiations.
But apparently U.S. negotiators didn’t get what they wanted out of the discussions as the government plowed ahead with higher tariffs and China is poised to retaliate. In a statement released Friday by the Ministry of Commerce said, “China expresses deep regret over the development and will have to take necessary countermeasures.”
Handbag retailers have been on something of a rollercoaster ride. Tariffs were due to rise to 25 percent in January, but Trump put those plans on ice as part of a 90-day truce with China that was later extended.
With positive signals coming from the talks, the industry thought that the situation would be resolved, but that all changed over the weekend when China allegedly backtracks on a number of concessions it had previously made, angering the U.S. and putting tariffs firmly back on the table.
While the administration has been largely tight-lipped on the details of what led to the setback, Reuters reported that China made an about-turn on a number of commitments in areas including theft of U.S. intellectual property and trade secrets, forced technology transfers and currency manipulation.