Possibilities Of A US China Trade Deal Seem Grim

Stocks Fall On Trade Worries

Stocks fell on Tuesday because of the negative news surrounding trade talks between America and China. News events on Tuesday have made the lead up to the trade negotiations almost as bad as it can be. Optimism about a deal has waned considerably. 

Investors, including myself, previously predicted a deal would occur this year. Now we must back off that expectation with the latest news. Traders should put little trust in statements by officials and reports. However, negative actions were taken; and I follow actions closer than words.

Near Worst Case Scenario For Trade Talks

It doesn’t seem like either side is getting ready to make a deal or agree to any concessions at the meetings later this week. Headlines couldn’t get any worse. Firstly, the US Department of Commerce added 28 new companies to its blacklist of Chinese firms banned from doing business in America. 

Firms on this list specialize in artificial intelligence, machine learning, and digital surveillance. One of the blacklisted companies is a video surveillance company called Hikvision. This firm is one of Ambarella’s customers. Ambarella’s stock fell 9.49% on this news. More importantly than impacting these 28 firms, this action makes it seem like a trade deal is much less likely.

China obviously didn’t react kindly to this action. A spokesperson from the Ministry of Commerce stated, “We strongly urge the U.S. to immediately… remove relevant Chinese entities from the list of entities as soon as possible.” The editor-in-chief of the Chinese and English editions of the Global Times tweeted, “I can feel that Chinese society has low expectation for real breakthrough in the new round of trade talks. Most people think alternate trade war/trade talks will be a normal thing between China & the US. Plus, people widely think the Trump administration can't honor its commitments.” 

It’s impossible to not have low expectations for these talks given the news that has come out in the past few days.

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