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Trump Calls Taiwan, Rattles China

Donald Trump isn’t the American president yet, but every move he makes – whether intentional or accidental – already affects the U.S. So it’s a bit unsettling when Trump acts without realizing the consequences of those actions and shakes up international relations between the two largest economies in the world. Why is China so angry? What can the U.S. expect as a result of Trump’s latest action?

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Donald Trump isn’t the American president yet, but every move he makes – whether intentional or accidental – already affects the U.S. So it’s a bit unsettling when Trump acts without realizing the consequences of those actions and shakes up international relations between the two largest economies in the world. Why is China so angry? What can the U.S. expect as a result of Trump’s latest action?

Trump Triggers China By Calling Taiwan. Is This Bad?

Last week, Donald Trump called Taiwan’s president Tsai Ing-wen as “a courtesy”. The problem with that call is that the U.S. – along with China and much of the world – has not recognized Taiwan as an independent nation since the late 1970s when Jimmy Carter formalized the “One China” policy. That international policy grew from communist revolutionaries dethroning the nationalist government in 1949, with the nationalist government escaping to Taiwan. Both sides have laid claim to China ever since. As such, Trump managed to insult China and shake up international relations with just that one call. And in true Trump fashion, the president-elect took to Twitter to poke China even more.

Obviously, China is not happy.

The Chinese Foreign Ministry claims Trump was tricked by Taiwan into taking the call. The following day, China lodged a formal diplomatic protest with U.S. officials, citing the One China policy as the political basis of U.S./China relations. Trump tweeted out that Taiwan’s president called him, not the other way around, and he just happened to pick up. Except, a government spokesperson for Taiwan publicly stated that both sides had arranged the call in advance. Trump then went back to his Twitter battleground to tell the world it’s okay to accept the call because the U.S. sells Taiwan billions of dollars of military equipment.

The big question “many people” are asking is whether this was an isolated case of “oops, I had no idea”, or if this is what the country should expect under President Trump. What’s unnerving is that Trump did not bother reaching out to the State Department or Secretary of State John Kerry for guidance. He just winged it. Earlier in the week, Trump called Pakistani Prime Minister Nawaz Sharif a “terrific guy” and invited Philippine President Rodrigo Duterte, who called Obama a “son of a whore,” to visit Washington. Trump is welcome to shift foreign policy how he sees fit as president. Voters gave him that power. But these unplanned calls are complete u-turns, and could unsettle not only the country’s peace, but the economy as well through the loss of trading partners.

Now the world waits to see China’s response. China’s options include severing U.S. relations, punishing Taiwan’s businesses with trade embargoes, or even threaten U.S. companies, such as Apple, who rely heavily on Chinese manufacturing. The Chinese government could also start flexing its military muscle with the world’s largest army as a scare tactic. However, China will most likely do nothing – this time.

 

Watch Al Jazeera news about China’s protest over Trump’s Taiwan call.

Trump is the first president in history to come into office with zero political experience. He needs to spend a little less time on Twitter and more time understanding international policy and running a country.

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Finance

Dow Jones Industrial Average Breaks 29,000 For The First Time in History

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Screenshot of Dow Jones Industrial chart taken January 15, 2020.
By ELAINE KURTENBACH, AP Business Writer

Slight gains send Dow Jones Industrial Average above 29,000!

The Dow Jones Industrial Average closed above 29,000 points for the first time and the S&P 500 index hit its second record high in three days Wednesday.

The milestones came on a day when the market traded in a narrow range as investors weighed the latest batch of corporate earnings reports and the widely anticipated signing of an initial trade deal between the U.S. and China.

President Donald Trump and China’s chief negotiator, Liu He, signed the “Phase 1″ deal before a group of corporate executives and reporters at the White House. The pact eases some sanctions on China. In return, Beijing has agreed to step up its purchases of U.S. farm products and other goods.

“This was telegraphed well enough that the market is kind of looking through it and toward the next phase and what that means,” said Keith Buchanan, portfolio manager at Globalt Investments.

Health care stocks accounted for much of the market’s gains. Utilities and makers of household goods also rose. Those gains outweighed losses in financial stocks, companies that rely on consumer spending and the energy sector.

The S&P 500 index rose 6.14 points, or 0.2%, to 3,289.29. The index also climbed to an all-time high on Monday.

The Dow gained 90.55 points, or 0.3%, to 29,030.22. The Nasdaq composite added 7.37 points, or 0.1%, to 9,258.70.

Smaller-company stocks fared better than the rest of the market. The Russell 2000 picked up 6.66 points, or 0-4%, to 1,682.40.

The benchmark S&P 500 index is on track for its second straight weekly gain.

Bond prices rose. The yield on the 10-year Treasury note fell to 1.78% from 1.81% late Tuesday.

While limited in its scope, investors have welcomed the U.S.-China deal in hopes that it will prevent further escalation in the 18-month long trade conflict that has slowed global growth, hurt American manufacturers and weighed on the Chinese economy. The world’s two largest economies will now have to deal with more contentious trade issues as they move ahead with negotiations. And punitive tariffs will remain on about $360 billion in Chinese goods as talks continue.

With the “Phase 1” agreement now a done deal, investors have more reason to focus on the rollout of corporate earnings reports over the next few weeks. Earnings have been flat to down for the last three quarters, and if the fourth quarter meets expectations, it should be around the same.

However, analysts are projecting 2020 corporate earnings growth to jump around 9.5%, which is why traders will be listening this earnings reporting season for any clues management teams give about their business prospects in coming months.

“We’re expecting a reacceleration in the back end of the year, so any (company) guidance that brings any type of skepticism to that could threaten the recent rally we’ve had and the gains that we’ve accrued in the past few months,” Buchanan said.

Health care stocks powered much of the market’s gains Wednesday. Several health insurers climbed as investors cheered a solid fourth-quarter earnings report from UnitedHealth Group.

The nation’s largest health insurer, which covers more than 49 million people, said its revenue rose 4% on a mix of insurance premiums and growth from urgent care and surgery centers. Its stock rose 2.8%. Other health insurers also moved higher. Anthem gained 1.6%, Cigna added 1.5% and Humana climbed 1.9%.

Technology companies also rose. The sector is reliant on China for sales and supply chains and benefits from better trade relations. Microsoft gained 0.7% and Advanced Micro Devices gained 0.8%.

Utilities and consumer staples sector stocks also notched gains. Edison International climbed 2.5% and PepsiCo rose 1.7%.

Financial stocks fell the most. Bank of America slid 1.8% after reporting weaker profits due to the rapid decline of interest rates in late 2019.

Energy stocks also fell along with the price of crude oil. Valero Energy dropped 3.3%.

Homebuilders marched broadly higher on news that U.S. home loan applications surged 30.2% last week from a week earlier. The pickup in mortgage applications reflects heightened demand for homes and suggests many buyers are eager to purchase a home now, rather than waiting for the traditional late-February start of the spring homebuying season. Hovnanian Enterprises jumped 6.4%.

Target slumped 6.6% after a disappointing holiday shopping season prompted the retailer to cut its forecast for a key sales measure in the fourth quarter. The company said weak sales of electronics, toys and home goods crimped sales growth to just 1.4% in November and December.

Benchmark crude oil fell 42 cents to settle at $57.81 a barrel. Brent crude oil, the international standard, dropped 49 cents to close at $64 a barrel.

Wholesale gasoline fell 1 cent to $1.64 per gallon. Heating oil declined 3 cents to $1.88 per gallon. Natural gas fell 7 cents to $2.12 per 1,000 cubic feet.

Gold rose $9.70 to $1,552.10 per ounce, silver rose 25 cents to $17.92 per ounce and copper fell 1 cent to $2.87 per pound.

The dollar fell to 109.91 Japanese yen from 110.00 yen on Tuesday. The euro strengthened to $1.1150 from $1.1128.

Markets in Europe closed mostly lower.

AP Business Writer Damian J. Troise contributed.

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Economy

Stocks Rally Despite Impeachment News

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Stocks rose on Thursday as investors looked past the news of President Donald Trump’s impeachment as well as mixed U.S. economic data.

The Dow Jones Industrials advanced 53.85 points to begin trading at 28.293.13

The S&P 500 recovered 4.93 points to 3,196.07

The NASDAQ added 19.39 points to Wednesday’s all-time record, at 8,847.12.

The S&P 500 is up nearly 7% since House Speaker Nancy Pelosi launched a formal impeachment inquiry in September.

Cisco Systems was the best-performing Dow component, rising 1.6%. The consumer staples and real estate sectors led the S&P 500 higher, gaining 0.4% each. Micron Technology shares also contributed to Thursday’s move higher. Conagra shares surged more than 14% and were on pace for their biggest one-day gain since Oct. 16, 1989.

Micron shares climbed 3.5% on the back of strong quarterly results. The chipmaker posted earnings per share and revenue that topped analyst expectations.

On the economic data front, weekly jobless claims fell to 234,000 from 252,000 the week before. However, economists expected claims to fall to 225,000.

Meanwhile, the Philadelphia Federal Reserve’s business conditions index fell to 0.3 in December from 10.4 in the previous month. Economists expected the index to slip to 8.

The Democrat-led House of Representatives voted Wednesday to impeach Trump for abuse of power and obstruction of Congress. Trump became only the third president to be charged with high crimes and misdemeanors and will now face a trial in the Republican-controlled Senate.

Prices for the 10-Year U.S. Treasury were lower, raising yields to 1.94% from Wednesday’s 1.93%. Treasury prices and yields move in opposite directions.

Oil prices gained seven cents to $61.00 U.S. a barrel.

Gold prices moved forward $1.80 at $1,480.50 U.S. an ounce. Copyright © 2019 Baystreet.ca Media Corp. All rights reserved.

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Business

Trade Chief Robert Lighthizer Says USMCA is ‘Gold Standard for Digital Trade’

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According to US trade representative Robert Lighthizer, the United States-Mexico-Canada Agreement (USMCA) will increase GDP and is a “big win for America,” as reported by Fox Business. Lighthizer said we have what is “really the absolute gold standard on digital trade and financial services.”

USMCA is expected by the Trump administration to bring back or generate 80,000 jobs that are related to the auto industry and “create as much as $30 billion of new investment in the sector.” The problems of US dairy farmers will also be reduced by the trade deal as it will provide new access to American wheat, poultry, eggs, and many others.

Fox Business reported that Lighthizer said USMCA will raise GDP by 1.2 percentage points and create over 550,000 new jobs when fully implemented. “We have the first trade agreement in a long, long time that has the support of almost every business group, almost every agriculture group, labor groups, Democrats and Republicans, so we’re really excited about where we are,” Lighthizer said.

In a December 15 report by CBS News, Lighthizer called the White House’s act of submitting a deal with House Democrats on the USMCA as “the most momentous day in trade history ever.” His statement also referred to the announcement of the first phase of a trade agreement with China.

“It was extremely momentous and indicative of where we’re going, what this president has accomplished,” he said.

The House is expected to vote on USMCA on Thursday, but the day could still change.

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