The markets tumbled on Friday as China escalated the ongoing trade war and President Trump signaled his intention to continue the economic battle.
On Friday, China retaliated by announcing new tariffs on $75 billion in American goods, set to begin on September 1. That news pushed the markets down. Dow futures dropped by more than 300 points before the market even opened.2
Earlier in August, Trump announced 10% tariffs on an additional $300 billion in goods, although some of those tariffs were later delayed until after the holidays.1
The losses grew after President Trump responded on Twitter. He said that he “hereby ordered” U.S. businesses who operate in China to “start looking for an alternative.” The Dow finished the day down more than 600 points.2
However, there appeared to be hope on Monday morning that the two sides may finally come to the negotiating table. The Chinese Vice Premier said over the weekend that the trade war is “bad for China, bad for the United States, and bad for the interest of the people of the world.” He added that China was willing to solve the problem through negotiation.1
President Trump also added that he had “second thoughts” about adding new tariffs on Chinese products and that China had been “hurt very badly” and desired a deal. Asian markets continued to tumble on Monday, but Dow futures were up 110 points ahead of Monday’s market opening.1
What does all this mean for your clients? It’s impossible to predict how long the trade war will continue or what the ultimate outcome will mean for the U.S. economy. While both sides have expressed interest in a deal, they’ve also shown a willingness to escalate the war if needed.
This may be the time to consider strategies that offer upside potential but have little exposure to market risk. For example, a fixed indexed annuity could be one vehicle that protects your clients from ongoing volatility.