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The U.S. stock market rocketed higher yesterday as fears of a possible trade war between the U.S. and China eased. As NPR's John Ydstie reports, the two countries have begun talks aimed at avoiding tit-for-tat sanctions that could damage both sides.
JOHN YDSTIE, BYLINE: After President Trump threatened China with steep tariffs late last week, the U.S. stock market tanked. But yesterday, U.S. stock indices regained about half their recent losses, with both the Dow industrials and the S&P 500 surging about 2.75 percent. The Nasdaq climbed about 3.25 percent as investors were reassured that a damaging trade war might be avoided. On Sunday, Secretary of the Treasury Steven Mnuchin said that the U.S. is negotiating with China and that he was cautiously optimistic tariffs could be avoided. White House trade adviser Peter Navarro also told CNBC yesterday that talks are underway.
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PETER NAVARRO: All I can tell you now is that Ambassador Lighthizer and the secretary of treasury are actively engaged with the Chinese.
YDSTIE: The Trump administration wants to dramatically reduce the $375 billion U.S. trade deficit with China. It also wants greater protection for U.S. intellectual property and technology. President Trump said last week he wants China to lower its 25 percent tariffs on U.S. automobiles exported to China. U.S. companies have skirted those tariffs by manufacturing in China, but China requires them to enter joint ventures with Chinese companies, giving them access to valuable U.S. technology. Eswar Prasad, a professor of trade policy at Cornell University, says President Trump's threat of 25 percent tariffs on a range of Chinese goods may have motivated the Chinese to offer concessions.
ESWAR PRASAD: It's probably a little too early to be wildly optimistic that this will result in a huge change in policy from the Chinese side, but certainly it could mean slightly faster and more concrete progress than in the past.
YDSTIE: China has promised many U.S. administrations that it will do more to open its markets and protect intellectual property but has often not followed through. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.