CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open Account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open Account
✖

Why the Stakes in This Weeks USChina Trade Talks Couldnt Be Higher for Markets

Article By: ,  Head of Market Research
May 7, 2019 11:08 AM

With little on the calendar over the next couple of day’s (tomorrow’s RBNZ meeting notwithstanding), the ongoing US-China trade negotiations will take center stage for traders.

To recap: The US has levied 25% tariffs on $50B of Chinese technology imports, along with 10% tariffs on $200B of other goods for the last ten months. In a tweet over the weekend, President Trump vowed to increase the 10% tariffs to 25% at 12:01 ET on Friday if a deal is not reached; he also indicated that he was considering implementing 25% import taxes on the rest of the $325B in Chinese imports that are not presently penalized. To put it simply, Trump’s threat has dramatically raised the stakes for this week’s US-China negotiations in Washington DC.

After initially hesitating, China is still sending a trade delegation, including chief trade negotiator Liu He, to the US this week. For traders, Thursday and Friday’s high-level talks between Liu, U.S. Trade Representative Robert Lighthizer, and Treasury Secretary Steven Mnuchin will be the key event to watch this month. From the market’s perspective, a “successful” negotiation will result in a scheduled Trump-Xi summit to sign a trade deal. Anything less, especially if it involves an escalation of tariffs on both sides, would be seen as a negative outcome for global risk appetite.

Market Implications

At the risk of stating the obvious, the trading relationship between the planet’s two largest economies has a dramatic impact on every single market across the globe. Speaking broadly, an escalation in tariffs would hurt risk-sensitive assets like high-yielding currencies, economically-sensitive commodities, and global stock indices (though S&P 500 traders are nonplussed so far) at the expense of “safe havens” (lower-yielding currencies, gold, and global bonds).

Source: TradingView, FOREX.com

It’s rare to get a “dress rehearsal” in trading, but the moves we saw at the start of the week give us a preview of what to expect if this week’s talks between the US and China break down. More concretely, another escalation in tariffs could take USD/JPY back to 109.00, AUD/USD below 0.6900 (if not 0.6800), and Gold up toward $1300, in addition to lopping another 10%+ off Chinese stocks and potentially ending this year’s uptrend in US indices.

The market stakes of this week’s negotiations couldn’t be higher – will US and Chinese negotiators be up to the task?


StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.


This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.


The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.


CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.

FOREX.com is a trademark of StoneX Financial Ltd. This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.

© FOREX.COM 2025