It looks like China just blinked in its trade battle with Trump

Johannes Eisele/AFP/Getty ImagesChinese President Xi Jinping.
  • Chinese President Xi Jinping on Tuesday discussed economic measures such as lowering import tariffs to open up the country’s economy.
  • Stocks rose more than 350 points as the Chinese president appeared to blink in his trade battle with US President Donald Trump.
  • Other proposed economic measures included legal intellectual property of foreign groups, improving the investment environment for international companies, and reducing duties on other consumer products.

After exchanging threats of a trade war with President Donald Trump, Chinese President Xi Jinping appears to have blinked in his back-and-forth with the US leader.

Xi appeased fears of a trade war between the US and China on Tuesday by discussing plans to further open up the country’s economy. Some economic measures he said were under consideration: lowering import tariffs on automobiles, enforcing intellectual property of foreign groups, improving the investment environment for international companies, and reducing duties on consumer products.

“Very thankful for President Xi of China’s kind words on tariffs and automobile barriers…also, his enlightenment on intellectual property and technology transfers,” Trump tweeted Tuesday. “We will make great progress together!”

The stock market seemed to respond well to the conciliatory tone. The Dow Jones industrial average jumped nearly 400 points at the open on Tuesday, while the S&P and the Nasdaq composite each rose over 1%. US automakers’ shares also rallied following the encouraging news, with Ford, General Motors, Tesla, and Fiat Chrysler all seeing gains at the opening.

“If you look at President Xi’s speech, it was conciliatory and that feels like a de-escalation,” said Art Hogan, who serves as the chief market strategist at the investment bank B. Riley FBR. “That’s what the market wants.”

Xi’s apparent willingness to temper the chances of a trade war with the US could allow Trump to declare victory, Politico’s Ben White wrote in his morning newsletter.

Greg Valliere, the chief global strategist at Horizon Investments, said it was too early for Trump to declare a win over his Chinese counterpart. But he called the developments a “big deal” for investors, saying it’s clear that China wanted to “lower the temperature” in the trade battle.

“The Chinese have pledged before to open up markets but haven’t followed through,” Valliere said in a note. “His endgame is unclear. But these comments from Xi have to be viewed as constructive.”

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