Trade Tensions Causing Early Stock Weakness? Anyone? Bueller?
The weakness in stocks early this morning has some pointing fingers at the latest burbles in the long-simmering trade tensions between the U.S. and China.
On Friday, the U.S. decided to impose tariffs on Chinese tire exports to the U.S. The People’s Republic fired back, saying it would investigate complaints by Chinese industry that U.S. companies are dumping chicken and auto products in the local market.
In the most-recent turn of the screw, China called for talks on the dispute Monday, suggesting that the flap may be containable and evidence emerged that the economic value of the affected sectors is relatively small, according to The Journal.
Some, such as Miller Tabak equities strategist Peter Boockvar, say such developments are part of the reason stocks saw some early weakness as they remind traders of the disastrous consequences of the famed Smoot-Hawley act of 1930, which pushed U.S. tariffs on foreign imports. Over at The Big Picture, he writes:
Over 7 days right before and after the Smoot-Hawley act was passed in mid June 1930, the DJIA fell 15% but got most of the decline back by late July before falling more than 30% into year end. Let’s hope the just announced tire tariff on China and their possible response is just a one off spat but global stocks are down as a result.
At the MarketBeat water cooler, the chatter seems to be that if a “trade war” were considered a serious possibility, we’d likely be down a lot more than the trading we’re seeing right now. But such concerns are probably at least giving some investors reason to take a little bit off the table.
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Trade Tensions Causing Early Stock Weakness? Anyone? Bueller?
