Wall St. gets immune to trade war rhetoric

Fears of tariffs and a potential global trade war have jostled U.S. stocks over the past few months, but there is a sense among investors that the market is taking the drum beat of rhetoric and statements more in stride.

In the latest salvo, U.S. President Donald Trump announced hefty tariffs on $50 billion of Chinese imports on Friday, and Beijing threatened to respond in kind. But even as the developments threatened to ignite a trade war between the world’s two largest economies, the equity market largely shrugged it off. The benchmark S&P 500 index ended down only 0.1% on Friday.

That paled compared to losses earlier in the year that were sparked by fears of a U.S.-China trade war that would be detrimental to economic growth.

‘Comfortably numb’

“The market has gotten reasonably comfortably numb to this tariff stuff,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “They are becoming more accustomed to this being a first foray and negotiating tool.” The U.S. Customs and Border Protection is to begin collecting tariffs on an initial tranche of 818 Chinese product categories on July 6.

“Its kind of the cry-wolf syndrome,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “I think people fear the tariffs and the uncertainty about it, but think, ‘ok, this is just another negotiating point.’”

On March 1, the S&P 500 declined 1.3% when Mr. Trump announced plans for hefty tariffs on steel and aluminum imports to protect U.S. producers.

Later in March, the S&P 500 tumbled 2.1% on another day of apparent escalating U.S.-China tensions. So far, Mr. Trump has taken little action beyond tariffs of 25% on steel and 10% on aluminum on imports from China, the European Union and other countries.

Mr. Trump’s style

The market has grown more used to Mr. Trump’s style, especially when it comes to international affairs, investors said.

“The market is starting to get accustomed to the President, the way the President negotiates, the way the President tries to prove his point,” Mr. Carlson said. “There is a growing awareness of how the president tries to do business.” To be sure, certain areas of the market remain sensitive to rhetoric about trade.

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Printable version | Jul 31, 2021 11:36:14 AM |

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