By Joyce Yu
Philadelphia, PA–Wall street moved sideways on Monday as hopes for a new round of tax cuts was offset by fears of an escalation in the Sino-U.S. trade war. To stand out from the Democrats ahead of the Nov. 6 congressional elections, republicans in the U.S. House of Representatives plan to unveil a fresh round of tax cuts this week.
“There is definitely a sense that Congress is going to get these tax cuts implemented before the end of this month and the positivity around that could be pushing the markets higher,” Scott Brown, chief economist at Raymond James told Reuters. “Despite all the trade tensions there’s still general optimism because the full effect of the previous tax cuts haven’t been seen yet.”
The Dow Jones Industrial Average was up more than 80 points, or 0.3% before losing all the gains by the afternoon, indicating that market sentiment remained cautious as investors brace for next tariff hit. US President Trump said last Friday he was ready to levy additional taxes on practically all Chinese imports, threatening duties on $267 billion of goods over and above planned tariffs on $200 billion of Chinese products, affecting virtually all Chinese imports into the United States.
China responded immediately to retaliate if U.S. takes new steps on trade. “If the U.S. side obstinately clings to its course and takes any new tariff measures against China, then the Chinese side will inevitably take countermeasures to resolutely protect our legitimate rights,” Foreign Ministry spokesman Geng Shuang said a regular briefing.
The world’s two largest economies have already hiked tariffs on $50 billion of each other’s goods. Trade negotiations aimed concluded last month unfortunately without major breakthroughs. While China is faced with soft economic data and sluggish stocks market, Washington appears emboldened where Trump said Wednesday he was not prepared to make a deal with China “that they’d like to make.” Still, he added, his administration will “continue to talk to China.”
Nevertheless, tariff hiking is expected to eat into people’s wallets as prices will likely go up. This includes Apple who said a “wide range” of its products would be hit by the proposed tariffs. On Saturday Trump tweeted Apple should manufacture its products in the U.S. to avoid his proposed tariffs on Chinese goods. Apples’ shares continued to drop on Monday.
In his latest note, analyst at Bank of America Merrill Lynch Wamsi Mohan opined Apple may “shift a small portion of their iPhone manufacturing to the US in response to President Trump’s request.” Under the “most likely” scenario, Apple would move 10% of its iPhone assembly to the U.S which is expected to raise the average selling price of the iPhone by 8%. If Apple shifts 50% or 100% of iPhone assembly domestically, it would increase iPhone prices by 14% and 20% respectively.
