New Tariffs On China Weigh On Stocks, Is This A Buying Opportunity?

Stocks closed lower yesterday as they awaited an announcement from President Trump on US-China trade.

Finally, at about 5:30 pm CST, it was announced that the U.S. will levy a 10% tariff on $200 billion of Chinese goods. And that will rise to 25% at the end of the year if there's no deal by then.

The WH is also considering whether to put tariffs on an additional $250 billion of Chinese goods.

The U.S. and China last week, already agreed to resume trade talks. Clearly, the 10% tariffs to start, and the acceleration later on, is meant to keep the talks moving with a deadline looming. And the possibility of an additional $250 billion provided further incentive.

Actually, the lower start and the gradual escalation is less severe than many had feared. So any additional downside from this news should be muted. And quite frankly, I think any dip because of it presents a good buying opportunity.

The markets were also weighed upon as the flooding worsened in the hurricane ravaged southeast. Gladly, hurricane Florence was downgraded from a category 5 to a category 1 last week before landfall. But the slow moving storm is dumping unprecedented amounts of rain and the damage is mounting.

By the way, while the markets assess the latest trade news with China, let's also remember that we're still waiting on news regarding trade talks with Canada. We've been waiting now for a couple of weeks. Both sides have assured that the talks are positive. But the market, now more than ever, is going to want some facts soon.

Should be a busy day today as trade talk is likely to dominate the session.

Fortunately, this is all happening while the U.S. economy is doing better than ever.

And trade tensions notwithstanding, the markets are poised for even more gains this year.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research

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