Trade war troubles are once again being reflected in the U.S. stock market.
The major averages reversed course Monday when sources confirmed that a Chinese delegation would visit the U.S. to continue trade talks after President Donald Trump made a series of threats regarding U.S.-China trade talks over the weekend.
In several tweets on Sunday, Trump said tariffs on $200 billion worth of Chinese goods would go up to 25% by the end of this week, countering the seemingly positive headlines made by some of his trade advisors in recent months.
The messaging weighed heavily on markets early Monday, with the Dow Jones Industrial Average swinging 430 points by the end of the day. Experts, including billionaire investor Warren Buffett, wondered how far tensions between the two countries could escalate.
Here's what four experts are watching now:
Warren Buffett, CEO of Berkshire Hathaway, was concerned about what a full-blown trade war could do to global markets:
"If we actually have a trade war, it will be bad for the whole world, and could be very bad, depending on the extent of the war. But there's times in negotiations when you talk tough. The one thing you can't do, though, is you can't shake your fist first and then shake your finger later on. I mean, that is not a technique that works well. […] You can't do something between the U.S. and China in a big way without it affecting all the major markets as they go around. And you're starting a game that you don't know the ending of, but you know it isn't a good game."
Jim Cramer, host of CNBC's "Mad Money," tried to parse what Trump's moves this weekend were aimed at achieving:
"The president's people — [U.S. Trade Representative Robert] Lighthizer, obviously — don't want to give in if there isn't an enforcement mechanism. And maybe the enforcement mechanism is, 'Look, first of all, we're going to leave the tariffs no matter what. And second, if you screw around with us, we're going to take them up.' See, I think this is like a prelude to saying, 'There will be no deal unless you accept the fact that our current tariffs are going to stay.' That's what Lighthizer wanted to begin with. But … [Treasury Secretary Steven] Mnuchin's like a cheerleader."
Art Cashin, director of floor operations at the New York Stock Exchange for UBS, had his eye on what's next for stocks:
"On Friday, everybody was talking about being within a week of signing a deal. We heard from Mnuchin and [National Economic Council Director Larry] Kudlow and others that we were getting very close, that many things had been removed, and then, suddenly, over the weekend, the president surprised everybody with these tweets. Now, what the market's going to watch for is will the Chinese delegation continue to be coming to the U.S. further in the negotiation? Will they be bringing the vice premier with them? So those are two touch marks. I think the way the market's trading right now is they think negotiations are still going on, there's a chance for a deal, but it certainly looks like it's been delayed and there are some things that are going to be a little tougher to work out than anybody thought."
Former U.S. Rep. Jeb Hensarling, now executive vice chairman at UBS, said that while this may have extended the timeline for a deal to be made, it didn't take one off the table entirely:
"It's in both countries' interests to reach an agreement. I think the probabilities still favor that. It's not the first time the president has threatened tariffs. I'm not here, really, to speak on the negotiating strategy, whether that was good or bad. Clearly, I think the timetable has been set back, and I think the question … is, at the end of the day, do you end up with no deal, which is clearly in nobody's interests, do you end up with a good deal, a better deal, or a best deal? A good deal is that we have some schedule to get rid of the tariffs, and maybe the Chinese buy some more semiconductors and soybeans."
