Just a few days after President Trump broke the mold with Chinese President Xi Jinping in Buenos Aires and agreed to a ceasefire in the US-American trade war, Trump tweeted that his government was working tight "to see if there was a real deal with China is actually possible or not ". If not, the self-styled "Tariff Man" warned that soon new charges could come on the table.

About two hours after these tweets in the morning, the US markets fill up. The Dow crashed over 800 points. And the S & P 500 closed 3.24 percent. This is the biggest one-day decline in two months.

Of course, it was not just renewed trading tensions that triggered the selloff. Part of the yield curve, which is the difference between short-term and longer-term US interest rates, has been negative this week. A popular recession signal, the general flatness of the curve and the partial reversal of the curve added to the fear that the US economy would no longer be in rough health. Then there's the American contractor Toll Brothers, who had reported the first order slump in four years in the face of a weakening real estate market, and the prospects for growth Stateside look much less rosy.

US stock prices are not surprisingly responsive to changes in US economic data. However, since the beginning of the year, markets have increasingly gotten around with the news of the trade war. Only on Monday, when the G20 came to an end, the shares rebuilt, without burdening the trading voltages. After Trump's tweets had traced this progress, the sell-off of yesterday happened.

According to Aditya Bhave of Bank of America Merrill Lynch, the trade war has fallen by around 6 percent since the beginning of the year against the S & P 500. As the Bhave chart shows, with the cumulative change in the S & P 500 by news category, even the strongest GDP growth in four years and the lowest unemployment in decades has not been enough to offset the impact of new tariff developments:

Thus, the S & P 500 may have been beaten since March, if President Trump had not escalated the trade war again, again per Bhave:

Not all US stocks are directly involved in China, but those who have been struggling this year compared to their peers. UBS's Keith Parker and Neal Burk calculate that the highest-selling stocks in China have lagged the S & P 500 by 4.2 percent since the start of the year, behind the S & P 500:

Beyond the US equities, global growth is likely to suffer if the Trump administration pushes the trade war again. The IMF estimates global GDP growth will fall 1 percent by 2020 if the US enforces its 25 percent duty on Chinese goods worth US $ 200 billion, a step originally planned for January.

The truce that was coined at this year's G20 stands is tentative. Although there is little detail on the specifics and some uncertainty about what exactly was agreed by both parties.

What we do know is that both sides have agreed to bargain over the next 90 days and stop the introduction of additional tariffs in the meantime. In return, China said it would buy, among other things, more agricultural products from the United States. The government also pledged to crack down on intellectual property and cyber theft, as well as other practices that distort markets in favor of China.

What we do not know is how long "Tariff Man" will support his deal.

Similar links:
Trump's breakthrough on China deal was confusing – FT
China will import more of what it does not want to do at home – FT Alphaville
A truce in the trade war can not save China's economy – FT Alphaville

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