Dow rallies 400 points after Xi Jinping calms trade fears

By Nathaniel Meyersohn

Chinese President Xi Jinping is giving Wall Street a lift.

The Dow rallied 400 points at the open Tuesday after Xi said in a speech that the Chinese government plans to “significantly lower” tariffs on imported cars. The S&P 500 and the Nasdaq each climbed more than 1%.

Automakers helped lead the charge. GM, Ford and Tesla all gained ground.

Xi’s conciliatory speech cooled down the temperature on trade tensions between the United States and China.

President Trump has proposed tariffs on up to $150 billion of Chinese goods. In retaliation, China said it planned to put $50 billion in tariffs on US planes, cars and soybeans.

“We heard almost exactly what we wanted to hear,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote to clients Tuesday.

Xi’s speech “strengthens our base case that negotiation and de-escalation will likely be the endgame in current US-China trade frictions,” Morgan Stanley economist Robin Xing wrote in a research note Tuesday.

The United States-China spat has roiled markets in recent weeks.

Investors fear a full-blown trade war could break out between the world’s two largest economies and slow global economic growth.

Trump complained as recently as Monday about China’s 25% tariff on foreign cars.

“Does that sound like free or fair trade,” Trump tweeted. “No, it sounds like STUPID TRADE – going on for years!”

Lowering barriers on imported cars “could provide Trump with an opportunity to back down from his tariff threats while claiming a victory of sorts,” Capital Economics’ Julian Evans-Pritchard wrote in a research note.

Xi didn’t mention Trump or the United States in his speech, but he stressed the need for dialogue and warned against a “Cold War mentality.”

Although Xi said lowering tariffs on imported cars were part of “a new phase of opening up” China, the Chinese government has mentioned the plan before.

When Trump visited China in November, Chinese officials pledged to “gradually and properly” reduce tariffs on imported vehicles. They didn’t give a specific time frame.

“There was little in Xi’s speech that we haven’t heard before,” Evans-Pritchard said. “What he has done, however, is cleverly combined existing reform pledges into a single package that Trump could feasibly point to as a victory.”

–CNN’s Jethro Mullen contributed to this story.