Signs of progress in the long-running trade conflict between the US and China lifted investor sentiment in the US and around the world during December. The US and China announced a preliminary trade deal that will reduce or postpone existing US tariffs on Chinese imports, whilst China has pledged to buy large amounts of US goods.
- US share prices reached record levels in December
- The US, Mexico and Canada reached agreement on USMCA
- President Trump was impeached
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Signs of progress in the long-running trade conflict between the US and China lifted investor sentiment in the US and around the world during December. The US and China announced a preliminary trade deal that will reduce or postpone existing US tariffs on Chinese imports, whilst China has pledged to buy large amounts of US goods. The news drove up US share prices to record levels; however, the “Phase One” trade agreement represents an early stage in a longer and more complex process. Despite this, President Donald Trump tweeted: “We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election”.
“The “Phase One” trade agreement represents an early stage in a longer and more complex process”
The Dow Jones Industrial Average Index rose by 1.7% over December and by 22.3% during the year. The broader-based S&P 500 Index climbed by 2.9% over the month and by 28.9% over the year. The technology-heavy Nasdaq Index rose by 3.5% in December and by 35.2% over 2019.
Trade proved to be a major theme for the US throughout December. The US, Canada and Mexico reached an accord on the United States-Mexico-Canada Agreement (USMCA), a new trade deal that replaces the North American Free Trade Agreement (NAFTA). Meanwhile, President Trump announced that he would impose tariffs on steel and aluminium imports from Brazil and Argentina, claiming that both countries had been engaged in devaluing their currencies. He went on to urge US policymakers to cut interest rates, tweeting : “The Fed should lower rates (there is almost no inflation) and loosen, making us competitive with other nations, and manufacturing will SOAR!”
Elsewhere, President Trump threatened to impose tariffs on US$2.4 billion-worth of French goods in reaction to France’s new Digital Services Tax (DST). The DST will affect US technology companies such as Google, Apple, Facebook and Amazon.
President Trump was impeached during December: the US House of Representatives voted by 230 votes to 197 in favour of impeaching the President for abuse of power, and by 229 votes to 198 in favour of impeaching him for obstruction of Congress. The Senate will hold a trial in the New Year; however, as the Senate is currently controlled by the Republican Party, President Trump is likely to remain in office. In a statement, the White House condemned the impeachment as “shameful” and stressed that President Trump is “confident that he will be fully exonerated”.
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