US-China Trade Talks Treading on Shaky Ground Amid Unsettled Economic Forecasts: Tech Sector Remains Resilient
Pending Decision on Commencement of Procedures by the Commission
In a seemingly defiant response to ongoing trade turmoil, Wall Street displayed a resilient performance on Tuesday, with technology stocks stealing the limelight. As political leaders from both nations gear up for crucial discussions, investors continue to show unwavering determination, particularly towards tech stocks.
While the outlook of the U.S.-China trade situation remains uncertain, the Nasdaq Composite has successfully reclaimed its positive stance for the year. The latest tariff announcements from President Trump have failed to stir a fresh wave of unrest in the market. Yet the lingering question remains: Will the two economic powerhouses find a permanent resolution to their impasse?
Market analysts like Michael Brown at Pepperstone suggest that a high-level conversation between U.S. President Trump and Chinese President Xi Jinping may be necessary to resolve the deadlock. Preliminary discussions of such a call are reportedly underway.
On Tuesday, White House spokeswoman Karoline Leavitt confirmed plans for a phone call between the two political heavyweights, although specific dates have not been announced.
In terms of equity indices, the Dow Jones Index gained 0.5% to reach 42,520 points, the S&P 500 increased 0.6%, and the Nasdaq Composite rose 0.8%. Preliminary data showed 1,916 advancers compared to 853 decliners on the NYSE, with 62 stocks remaining unchanged.
Global Economic Woes Mount
New forecasts from the Organisation for Economic Co-operation and Development (OECD) indicate that the trade dispute is severely hampering economic growth aspirations. The OECD has trimmed its global economic growth estimates for both the present and upcoming years, citing increased trade barriers and ongoing uncertainty as key factors. Notably, the U.S. economy is expected to suffer most from this trend, with China's economy faltering according to recent data releases.
U.S. job openings increased slightly in April, while industrial orders declined more sharply than predicted. On the bond market, yields showed minimal changes, with the yield on ten-year U.S. Treasury notes remaining relatively steady at 4.46%. Despite analysts' expectations of rising prices and falling U.S. yields due to growth risks, there is no forecast of the yield dropping below the 4% mark for ten-year maturities in the near future.
Political Drama: Musk's Contempt for Trump's "Honungicious Bill"
After hitting a six-week low, the dollar recovered significantly, with the dollar index increasing by 0.6%. The Greenback was also bolstered by the euro's weak performance, which followed lower-than-expected inflation data from the eurozone. With a rate cut from the ECB already anticipated for Thursday, the new price data could fuel expectations for additional rate cuts further down the line.
Gold Loses Shine, Oil Prices Remain High
The strengthening dollar had a negative impact on the gold price, causing it to drop 0.8% to $3,353. However, the precious metal remains close to its recent multi-week highs, with ongoing trade conflicts keeping demand for safe-haven gold robust.
Oil prices continued to surge despite grim economic expectations. Notations for Brent and WTI increased by up to 0.9%. Reduced hopes for a ceasefire in Ukraine prevented additional Russian supply, while the U.S. Congress is preparing new sanctions targeted at the oil sector.
Tech Stocks Continue to Shine
The technology sector saw strong demand, with shares of Nvidia, Super Micro Computer, and Micron Technology all performing well. Micron Technology, in particular, experienced a 4.2% increase following the announcement of its first sample of a new AI-focused chip for smartphones.
Walt Disney gained 0.6% after announcing job cuts in various departments, while Dollar General saw a 15.9% surge following an improved outlook. MoonLake Immunotherapeutics surged 18% amid takeover speculation with Merck & Co.
Sources: ntv.de, toh/DJ
- Wall Street
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Background and Context
The trade dispute between the U.S. and China is a complex, long-running saga. In May 2019, President Trump imposed a 25% tariff on $200 billion in Chinese goods. China retaliated with equivalent tariffs on U.S. products. Over the following two years, both sides have imposed additional tariffs.
In December 2020, as part of a so-called "Phase One" deal, both nations agreed to reduce some tariffs on each other's products. According to this initial agreement, the U.S. tariff on $120 billion of Chinese goods was lowered from 15% to 7.5%, while China agreed to lower tariffs on $75 billion of U.S. goods from 15% to 7.5%. However, key issues like technology transfers and intellectual property rights remain unresolved[1][2].
Tensions escalated again in the following months, with India banning over 200 Chinese apps in June 2020, and Congress passing legislation that threatens to delist Chinese companies on U.S. stock exchanges if they fail to comply with U.S. auditing requirements[2]. In January 2021, President Trump prohibited U.S. investors from buying or owning shares in certain Chinese firms, citing national security concerns[3].
In an attempt to de-escalate the tensions, President Biden and Chinese President Xi Jinping held a virtual summit in March 2021, during which the two leaders committed to “upholding the mutual agreement they reached last September, which called for defusing their bilateral tensions through dialogues, even as they continued to disagree on issues like technology and human rights[4][5].
In August 2022, the U.S. and China agreed to a joint statement that outlined a substantial reduction in tariffs. By May 12, 2025, both countries agreed to a 115% reduction in tariffs, leaving a base rate of 10% for reciprocal tariffs on both sides. China also agreed to suspend its initial 34% tariff on U.S. goods for 90 days, leaving a 10% tariff in place during this period[1][2][3].
- Wall Street
- China-US Trade Agreement
- Tech Stocks Gain
- The Commission, eager to navigate the complexities of the trade agreement, has been closely monitoring the tech sector's performance, as it remains a key indicator of the economy's resilience.
- Despite the economic woes mounting globally, the Finance ministry finds solace in the fact that technology innovations continue to propel business growth, offering a glimmer of hope amid the unsettled economic forecasts.
