Wall Street on Thursday returned from the holiday in a positive mood and eager to put trade worries aside. Stocks rallied, as investors focused on the growing economy and upbeat projections for corporate earnings.
That said, the Dow Jones Industrial Average started to wobble and lose traction in late afternoon trading, as trade jitters lingered.
Federal Reserve minutes released in the afternoon showed that officials are worried about escalating trade conflict but aren’t inclined to delay planned interest rate hikes this year.
Trading volume was light Thursday, which is to be expected on the day after July 4. The real fireworks start tomorrow.
Washington has said it would implement tariffs on $34 billion of Chinese imports, effective Friday. Beijing has vowed to retaliate with a commensurate level of tariffs on the same day. If China retaliates against U.S. tariffs, Washington is ready to impose additional tariffs on $400 billion in Chinese goods.
China warned on Thursday that the U.S. is “opening fire” on the world with its threatened tariffs.
An EU-China alliance?
Reports surfaced this week that China is lobbying the European Union to issue a strongly worded joint statement against President Trump’s trade policies at a summit scheduled for later this month.
China’s leaders are suggesting to the EU a trade alliance, which would include China opening more of its market to European exports.
China also is proposing that the two economic powers initiate legal actions against the U.S. at the World Trade Organization (WTO), an entity that Trump on Monday attacked as unfair to America.
The stakes are high. The U.S. and China are the world’s two largest economies; the EU is the largest trading bloc.
If the EU agrees to join forces with China, it would represent a seismic shift in the global economic order