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Many people think stock markets as a proxy for economy. Since Trump announced the tariffs on aluminum and steel imports, S&P 500 has bounced up about 5%. That means, investors hold an optimistic view on the current round of the trade wars.
Globalization has entangled China and the U.S. in a very tight manner. China needs the U.S. market to sell goods made in China, and the U.S. needs China’s help to manufacture products that Americans want. In the setting of a negotiation, the party making payments usually has a stronger negotiation power. At the first glance, the Unite States is the winner, so the stock markets reacted positively.
Although the U.S. won the first round, China will fight back. China is the largest buyer of many natural resources and agricultural goods, such as chickens, corns, and soy beans. If China imposes tariffs on these products, the U.S. will have a big trouble.
China will win the second round.