Stocks Point Toward Recovery on the Heels of a US-China Trade War Sell-Off

Stock futures are edging toward recovery on Tuesday, a day after escalating trade tensions between the United States and China led to the worst day for major benchmark indexes since early January.

The Dow Jones Industrial Average indicated a gain of 0.57% in premarket trading, while the S&P 500 and the Nasdaq Composite were higher 0.68% and 0.92%, respectively.

Footwear stocks also moved cautiously, with Nike Inc., VF Corp., Crocs Inc. and Gap Inc. in the green ahead of market open, while Skechers USA Inc. and Under Armour Inc. were down. (All companies closed in the red yesterday.)

Triggering Monday’s sell-off was China’s announcement that it would retaliate with new tariffs of 5% to 25% on $60 billion of U.S. imports. The move came only one business day after President Donald Trump raised levies from 10% to 25% on $200 billion in Chinese goods.

Early Tuesday morning, Trump took to Twitter to post a series of tweets about the ongoing negotiations with China. “We can make a deal with China tomorrow, before their companies start leaving so as not to lose USA business, but the last time we were close they wanted to renegotiate the deal. No way! We are in a much better position now than any deal we could have made,” he wrote.

In a two-part tweet, he added, “When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense. We have to be allowed to make up some of the tremendous ground we have lost to China on Trade since the ridiculous one sided formation of the WTO. It will all happen, and much faster than people think!”

Although the latest round of tariff hikes didn’t include footwear, the next tranche — which Trump has threatened on all remaining imports from China, valued at approximately $300 billion — is expected to impact both shoe companies and consumers.

If those proposed duties go into effect, the Footwear Distributors and Retailers of America reports that consumers will pay a shocking $7 billion in additional costs each year for shoes.

“These are the real numbers we have calculated; they are not empty rhetoric,” said Matt Priest, FDRA’s president and CEO. “Import taxes on shoes are not paid by China. They are paid by every American every time they buy shoes. This is not fair, it is not sustainable, and it will not solve our trade issues. We ask the president to read our numbers, realize hiking import taxes on shoes inflicts unnecessary financial pain on everyone in America and take shoes off his new 301 list.” (Section 301 would impose even more tariffs on footwear, apparel, home goods and more items manufactured in China and imported into the U.S.)

Among the price increases estimated by the FDRA include canvas shoes, which will climb from $49.99 to $65.57, and performance running shoes from $150 to $206. Vans, Steve Madden, J.C. Penney and Columbia Sportswear are only some of the footwear brands and retailers that have already indicated they would need to hike prices for consumers in response to the rising levies.

“This is a self-inflicted wound that will be catastrophic for the nation’s economy,” said Rick Helfenbein, president and CEO of the American Apparel & Footwear Association. “By tightening the noose and pulling more consumer items into the trade war, the president has shown that he is not concerned with raising taxes on American families or threatening millions of American jobs that are dependent on global value chains.”

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