Dow rallies 429 points after Xi Jinping calms trade fears

Chinese President Xi Jinping gave Wall Street a lift.The Dow rallied 429 points on Tuesday after Xi said in a ...

Posted: Apr 11, 2018 6:50 AM
Updated: Apr 11, 2018 6:50 AM

Chinese President Xi Jinping gave Wall Street a lift.

The Dow rallied 429 points on Tuesday after Xi said in a speech that the Chinese government plans to "significantly lower" tariffs on imported cars as part of efforts to further open China's economy.

The S&P 500 and the Nasdaq each climbed more than 1%. Automakers helped lead the charge: GM, Ford, Honda and Tesla all gained ground.

Related: How did China end up posing as the defender of global trade?

Xi's conciliatory speech cooled trade tensions between the United States and China. Investors hope Xi's plan will convince the Trump administration to move away from protectionism.

President Trump praised Xi on Twitter on Tuesday. "We will make great progress together!" he said.

"This could provide Trump with an opportunity to back down from his tariff threats while claiming a victory of sorts," Capital Economics' Julian Evans-Pritchard wrote in a research note Tuesday.

The United States-China spat has roiled markets in recent weeks.

Related: The stock market can't figure out Trump's trade policy

Investors fear a full-scale trade war could break out between the world's two largest economies and slow global economic growth.

Trump has proposed tariffs on up to $150 billion of Chinese goods. In retaliation, China said it planned to put $50 billion in tariffs on US planes, cars and soybeans.

Trump complained as recently as Monday about China's 25% tariff on foreign cars.

"Does that sound like free or fair trade," Trump tweeted. "No, it sounds like STUPID TRADE - going on for years!"

Xi didn't mention Trump or the United States in his speech, but he stressed the need for dialogue and warned against a "Cold War mentality."

Related: Head of world's largest hedge fund 'worried' about a trade war

Although Xi said lowering tariffs on imported cars was part of "a new phase of opening up" China, the Chinese government has mentioned the plan before.

When Trump visited China in November, Chinese officials pledged to "gradually and properly" reduce tariffs on imported vehicles. They didn't give a specific time frame.

"There was little in Xi's speech that we haven't heard before," Evans-Pritchard said. "What he has done, however, is cleverly combined existing reform pledges into a single package."

Related: How a US-China trade war could hurt (and help) others

Investors will now wait to see how the administration responds.

With midterm elections approaching in the fall and Trump's Midwest farm base caught in the US-China fight, "Trump will gladly take any bone that the Chinese throw his way," said Ed Yardeni, president of Yardeni Research. Trump admitted Monday that Chinese tariffs may hurt farmers, but said "we'll make it up to them."

Related: Trump promises to 'make it up' to farmers hit by China tariffs

Legal developments also loomed over the market for the second straight day.

The Dow lost most of its gains at the end of the day Monday as news broke that the FBI had raided the office and home of Michael Cohen, Trump's personal lawyer and confidant.

Stocks recovered Tuesday.

"Everybody slept on it and recognized that wherever this leads it's not likely to have a significant economic impact," Yardeni said.

-CNN's Jethro Mullen contributed to this story.

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Nobles192616
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Iowa Coronavirus Cases

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Confirmed Cases: 79506

Reported Deaths: 1256
CountyConfirmedDeaths
Polk15227256
Johnson498527
Woodbury494461
Black Hawk433686
Linn3762106
Story327917
Scott276527
Dubuque276040
Dallas267538
Pottawattamie197637
Buena Vista194112
Marshall175934
Sioux13203
Wapello125757
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Clinton106218
Muscatine106052
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Crawford9944
Cerro Gordo99321
Warren9276
Jasper75632
Des Moines7377
Marion7074
Tama68731
Carroll6305
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Lee5947
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Washington43011
Louisa42515
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Lyon2413
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Cedar2191
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Kossuth2170
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Grundy2012
Madison2012
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Howard1825
Iowa1821
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