China and the US have agreed to pause the 145% US tariffs and 125% Chinese tariffs for 90 days while they negotiate an agreement.

If the high tariff rates had gone into effect, it would have been similar to a trade embargo. Both countries have realized a trade embargo would be devastating to both economies.

The US imports about 5 times more from China than China imports from the US. The US is the largest purchasing economy in the world. The buyer has the power.

This gives the US a powerful position in this situation. We finally have a president that understands the strength of the US economy and is acting accordingly.

I am encouraged that the Trump administration will be able to negotiate a strong trade policy with China. Certainly better than the trade agreements for the past several decades.

In the meantime, there will likely be volatility until a trade deal with China is completed.

The Trump administration wants to complete a deal quickly. China historically takes a very slow, deliberate, and methodical approach.

The volatility could be over fairly quickly or could extend for a long period. Currently, there is no way to predict.

In the meantime, it would be wise to protect your investments and reduce your risk to the downside.

 

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