U.S. stocks reach new highs after rumours of 50% cut on Chinese tariffs

U.S. stock indexes jumped to new highs on Thursday, following rumours that the United States has offered to cut existing tariffs on Chinese goods by as much as 50 per cent and suspend new tariffs scheduled to go into effect on Sunday in an attempt to secure a "Phase One" trade deal.

The Wall Street Journal and Bloomberg reported that U.S. negotiators have offered to reduce tariffs on about $375 billion US in Chinese goods by 50 per cent across the board, two people familiar with the negotiations said on Thursday, and suspend tariffs on $160 billion US in goods scheduled for Sunday.

U.S. President Donald Trump posted on Twitter Thursday that the U.S. was "very close" to nailing down a deal.

 The S&P 500, Dow Jones Industrials and the Nasdaq opened lower then reversed after Trump's statement, which comes just before tariffs are due to go into effect on Sunday. The indexes had slipped from record levels two weeks ago.

The S&P 500 briefly rose more than one per cent to hit a record intraday high of 3,176.28 and was last up 0.5 per cent. While the MSCI's all-country world index, tracking shares in 49 countries, climbed to 551.84 points to surpass the previous record of 550.63 points set in January 2018.

U.S. Trade Representative Robert Lighthizer told senators during a briefing that announcements were possibly "imminent" on U.S. tariffs, Sen. John Cornyn told reporters.

The White House is expected to make an announcement regarding U.S.-China trade later on Thursday. 

Sunday crucial date for trade war

Trump and Chinese President Xi Jinping have been embroiled in a 17-month trade war that has slowed global growth and dampened profits and investment for companies around the world.

Sunday is a crucial date. If the U.S. does not suspend the new tariffs, Beijing officials will apply more tariffs on American  goods and may suspend talks until after the U.S. presidential election in November 2020, many trade experts believe.

China also said it will reinstitute on Sunday an additional 25 per cent tariff on U.S.-made vehicles and 5 per cent tariffs on auto parts that had been suspended at the beginning of 2019.

The U.S. is due to retaliate by imposing tariffs on almost $160 billion US of Chinese imports such as video game consoles, computer monitors and toys.

The White House had no comment on any tariff reduction offers.

The final percentage of tariff rate reduction the U.S. might offer Beijing has not been set, and will be proportional to the amount of the Section 301 trade war issues addressed by Chinese concessions, one source said.

During a regular briefing on Wednesday in Beijing, Gao Feng, spokesman at the Chinese commerce ministry, told reporters: "The two sides' economic and trade teams are maintaining close communication."

If U.S. escalates, Beijing will retaliate 

Trump, speaking at a White House event on paid parental leave later on Thursday morning, acknowledged the impact.

"The stock market's up very substantially today as some of you may know. And when it goes up I think of 401(k)s," he said.

China and the United States agreed in October to conclude a preliminary trade agreement, but Beijing is balking at U.S. demands that it promise to buy a specific amount of agricultural goods. Beijing is also demanding rollbacks of all existing tariffs imposed by the United States.

Beijing has said previously it would retaliate if the U.S. escalates the trade dispute.

In August, China said it would impose 5 per cent and 10 per cent in additional tariffs on $75 billion US of U.S. goods in two batches. Tariffs on the first batch kicked in on Sept. 1, hitting U.S. goods including soybeans, pork, beef, chemicals and crude oil.