The recent trade agreement between the US and the European Union has generated mixed sentiments in the stock market, while investor focus shifts towards negotiations with China.
US-EU Deal: Pros and Cons
On July 28, the US finalized a trade deal with the EU that imposes a 15% baseline tariff on EU goods, while most US goods entering the EU will incur a 0% rate. This lopsided agreement, referred to as 'submission' by France, may cost EU car manufacturers and pharmaceutical companies billions annually.
Focus on China's Negotiations
Market attention now centers on trade discussions with China, the US's largest trading partner. With the August 1 deadline approaching, no deal is yet in sight, leading to concerns that both parties may revert to mutual punitive tariffs. However, there is hope for a 90-day extension of negotiations, as both sides are easing their rhetoric.
Short-term and Long-term Perspectives
Reports indicate that trade talks will focus on access to Chinese markets. President Donald Trump stated he would 'love to see China open up their country.' Given the current trends, it's possible for both sides to reach a more balanced agreement, which could positively influence market conditions.
The US-EU deal poses certain challenges for European companies, while the future of trade relations with China remains uncertain. A favorable resolution to these matters could significantly affect global markets.
