We have good news to start out the week, and it’s also showing how the technology sector is one of the biggest beneficiaries of US/China cooperation (and one of those economic sectors most hurt by barriers).
Here’s how Reuters puts it this morning:
“U.S. stock index futures rose sharply on Monday, with chipmakers making handsome gains, as trade tensions between the United States and China eased after both sides agreed to restart talks.”
With these concessions towards the Chinese in terms of technology in general, and microprocessors in particular, we’re seeing rosier reports from American chip makers compared to early June: at the time, we reported that Broadcom, which came out with dire prognostications before these conciliatory attempts were made, was one of several chip makers that sells large volumes to Huawei for smartphones.
Notably, U.S. stock futures are up significantly before the bell on this news, and that makes sense given that prior to the G20, even positive words were moving markets higher on any given trading day.
Some of this enthusiasm on the markets might be simply chimerical, but at least there is actual positive progress between the U.S. and Chinese administrations. It seems the G20 did work out after all, and world leaders are realizing that the global tech industry is so interconnected that it’s sheer lunacy to try to pry national interests apart with tariffs.
Just take rare earth metals, for example.
“Chinese officials have in recent months raised the specter that Beijing could potentially cut off supplies of critical rare-earth materials—key components in products including cell phones and smart bombs—to the United States in response to Trump’s decision to impose harsh tariffs on Chinese goods and blacklist the Chinese telecommunications giant Huawei,” wrote Lara Seligman Friday at Foreign Policy, describing the American leadership as “asleep at the wheel” on the country’s evident dependence. “Experts say such a move by China could devastate the United States’ ability to wage war, as Beijing controls more than 90 percent of the global production of these minerals.” (bolding added, links included)
Market movements show that investors are tuned in to the issue, and not likely to be persuaded by empty claims that America does not need trading partners to source these minerals.
There are also ramifications on the precious metals and rare earths markets, available to those who do the research. For now, take comfort in some easing of punishing trade barriers and look freshly at your long-term strategy.
