By Joyce Yu
Philadelphia, PA–Wall Street opened higher even as the US and China just moved ahead with a new round of tariff raise. Leaving the trade friction simmering in the background, investors seem to be less worried about trade, lifting market sentiment on Thursday.
“The market is showing incredible strength,” Paul Hickey, co-founder of Bespoke Investment Group, told CNN. “Sentiment had gotten really out of hand. The pullback was a reality check. The lack of a new high for so long has let the market play catchup to fundamentals.”
The Dow hit its first record high on Thursday since late January after surging about 3,300 points from a low on April 2, when the US-China trade clash just started. This week, both countries slapped new tariffs on each other’s goods, but the new levies were lower than previously feared. The U.S. administration announced on Monday it would impose 10% tariffs on $200 billion worth of Chinese imports, which would rise to 25% by year-end. China retaliated immediately by introducing levies over $60 billion worth of American products, taking effect next week. China further called on the US overnight to show sincerity and take steps to correct its behavior.
“It will take people some time realize this is not going away anytime soon,” Tom Martin, senior portfolio manager at Globalt told Reuters. “We think the situation with China will take the longest time to resolve.” Echoing the same view, billionaire co-founder of Alibaba Jack Ma said at the World Economic Forum in the northern Chinese port city of Tianjin, “The current economic situation is indeed not good, and that could go on longer than people think.” “On China-U.S. frictions, people should make preparations for the next 20 years.”
Ma further told Chinese news agency Xinhua on Wednesday that he will no longer live up to the promise he made to President Trump two years ago that Alibaba plans to bring small U.S. businesses onto its platform to sell to Chinese consumers, creating 1 million jobs in the United States. He said, “The current situation has already destroyed the original premise. There is no way to deliver the promise.”
Calling to avoid over-reliance on U.S. imports, Alibaba announced this week to set up a dedicated chip subsidiary, with the first self-developed AI inference chip expected to be launched in the second half of 2019. These chips can be used for autonomous driving, smart cities and logistics.
Having invested in several chipmakers, Alibaba bought a Chinese microchip maker Hangzhou C-SKY Microsystems in April. In the same month, Ma told university students in Tokyo that “The market for chips is controlled by America.” “That’s why China, Japan and any country — you need core technologies.”
Not only business leaders but also Chinese academics have been vocal about addressing China’s heavy reliance on foreign-made chips. “The ZTE incident was a wake-up call” for Chinese leaders, Minxin Pei, professor of government at Claremont McKenna College in California, said at a conference in Hong Kong recently.
