The “Trade War” between United States and China escalated last week with the U.S. imposing nearly $200 billion of new tariffs on the Middle Kingdom. China retaliated immediately, announcing another $60 billion of import taxes on U.S. goods.
Then something unexpected happened. Markets didn’t panic. Just like the “Whos of Whoville,” who continued to sing after the Grinch stole Christmas, stocks actually went up.
In fact, U.S. stocks hit all time highs this week, with the Dow up 2.2% and the S&P 500 up 0.8%. Chinese markets also rose. Until last week they had dropped like a rock in direct correlation to the Trump imposed tariffs. The Shanghai and Shenzhen Exchanges were both up approximately 3% last week versus being down 25% and 17% year-to-date, respectively.