Stocks capped off a four-week winning streak Friday, as investors are realizing that President Trump is succeeding in bringing China around on trade and that the underlying U.S. economy is solid.
Through his tough use of counter-tariffs, the President has brought China to the negotiating table. Last week, China confirmed that its top trade negotiator, Vice Premier Liu He, will travel to Washington, D.C. at the end of the month. Adding to the optimism was a Wall Street Journal report that Treasury Secretary Steve Mnuchin was considering easing tariffs on China, signaling some progress in trade talks.
In addition to tackling the trade imbalance with China, the Trump administration is using the judiciary to go after Chinese companies for intellectual property theft. Criminal allegations are now being brought against Huawei Technologies for intellectual property theft and against two other Chinese companies that were accused in a previously settled civil case of stealing semiconductor design secrets from Micron Technologies.
For years, the weak leadership of former President Obama let the vast communist dictatorship of China go completely unchecked. Now China is finally being held accountable, and investors are starting to realize that President Trump knows what he’s doing here.
For instance, China is hurriedly pushing through a new law ending the practice of forced technology transfers and violating foreign companies’ intellectual property rights, something the U.S. has made a key priority in the current trade talks.
Beijing’s rush to appease President Trump makes sense since China’s growth rate recently slipped to its lowest point since 1990.
Meanwhile, the underlying U.S. economy remains sound, driven by the President’s pro-growth policies. The 3.7 percent unemployment rate in November, for instance, was the lowest in almost 50 years.
Even the wild market volatility at the end of last year masked some solid economic data. Many companies reported better-than-expected earnings last week, while jobless claims were lower than economists had predicted. In addition, a surge in automobile production, construction supplies, and business equipment pushed manufacturing production to increase by an unusually high 1.1 percent, compared to the highest estimate of a 0.4 percent increase.
Many of the better-than-expected corporate earnings results came from the positive effects of the President’s corporate tax cut last year. In fact, other countries are starting to slash their corporate tax rates after seeing its success in the United States. According to The Wall Street Journal, “Foreign politicians are under particular pressure because the tax law enacted by a particular U.S. President is making them look bad.”
The continuing good news about the strength of the U.S. economy, combined with increasing indications that China is under significant economic pressure to reach a trade deal with President Trump, offer ample reason for optimism, and the stock market’s recent performance shows that investors are finally grasping this new paradigm in the Trump economy.
Dr. Gina Loudon, Ph.D. is a bestselling author, columnist, and frequent news commentator. She was a Trump delegate to the Republican National Convention and currently serves on the Donald J. Trump for President Media Advisory Board.