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Incredible Global Rally Continues, As Tariff Non-News Resonates In Risk-On Environment

Go higher and never stop.

China’s reciprocal halving of tariffs on some $75 billion in US goods served as yet another catalyst for equities Thursday, as Asian shares extended gains.

As part of the “Phase One” trade deal between the world’s two largest economies, Donald Trump said he would slash the tariff rate on more than $100 billion in Chinese goods taxed from September 1 to 7.5% from 15%.

China’s announcement Thursday amounts to reciprocation. Beijing will lower the rate on some items to 5% from 10%, and on others from 2.5% from 5% effective February 14. As a reminder, here is the how Trump’s tariffs on Chinese goods evolved:

Just as Trump kept all other tariffs in place, other levies placed on US goods by China over the course of the trade war will remain, although Beijing did say the Party continues to process waivers, in keeping with a process that allowed importers in China to keep buying US goods late last year after quotas were reached.

Retaliatory tariffs on US crude will be cut to 2.5% from 5%, while tariffs on soybeans will drop to 27.5% from 30%. Levies on pork, beef and chicken will fall to 30% from 35%. The rates still seem high because those goods were subject to tariffs prior to the September escalation. Those previous tariffs are still in effect.

There’s really nothing to see here. China almost surely agreed to this under the “Phase One” deal, and, again, it’s simply a reciprocation to Trump’s decision to halve the tariffs he imposed on September 1.

Still, investors (carbon-based and otherwise) have pounced on any incremental piece of good news this week, and Thursday was no exception. Asian shares surged, with Japanese equities helped along by a beat and raise from Toyota, which surged 2.6%. The Nikkei is also getting a boost from a weaker yen, which is on track for its worst week against the dollar since July of 2018.

It’s not all risk-on, though. Bonds are steady and gold is higher.

But, ultimately, equities’ predisposition is to rise. The Kospi had its best single session since November of 2018 on Thursday.

Meanwhile, mainland shares in China are now riding their best three-day gain since April after starting the week with one of the worst plunges on record.


 

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