Trump signed a text authorizing 25% Tariffs on $50-60 bn of imports of certain products from China. The list of products will be announced in 15 days. US Treasury will also unveil a detailed plan regarding US investment restrictions on China within 60 days, according to a White House official. On the positive side the EU, Argentina, Australia, South Korea and Brasil, joined Canada and Mexico in the list of exempted countries from the Steel and Aluminium Tariffs. China replicated, looking to impose duties on about $3B worth of American imports.
A move driven by negative sentiment rather macroeconomic changes
So far, the announced measures would have a limited impact on global growth. As a reminder, Steel and Aluminium only represent 1.5% of US total import (63% of which are now exempt), and the latest announcement are rather isolated to specific sectors/companies. China’s reaction remains also fairly measured for the moment. Hence, the broad-based market reaction was mainly driven by sentiment and the fear of the situation worsening. Given the current high valuations of the stock market, sentiment can deteriorate quickly and markets could remain in a risk-off mood for the next couple of days or weeks. While the probability of a Sino-US trade war has increased, it is still not the base case scenario according to most analysts.
Technically the SP500 broke the March low at 2650, which opens the way to the February low at 2530. But Intraday, we could see rebound after yesterday’s sharp move, with index finding first resistance between 2650-60, and more important resistance at 2690-2700.
Resistance: 2650/60, 2687 (38.2% of latest wave down) 2695
Support: 2643 (yesterday close), 2615 (after mkt low), 2600