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Jacob Sonenshine: What's next for socks if trade stocks don't go well? Well, it's Thursday, October 10th. That means that much anticipated trade meeting is happening Thursday. What are the two positions of the US president Donald Trump and the Chinese leader, Xi Jinping. Well, Trump's position of late, we don't need a trade deal. He also said, we don't need that. The US doesn't need that before the 2020 election. And he's been saying, and most recently, he said on Thursday, that China is the one that needs a trade deal. Of course, this is rhetoric. Let's also point out that the Chinese economy has ailed a little bit more than the US economy in the face of this trade war. Now that's Trump's position. Xi Jinping's position, we don't need a full comprehensive trade deal and then said after that, but we are open to a partial deal. So you have a lot of rhetoric going back and forth, but they're actually coming to the table today, by the way, one condition for Xi Jinping's position there. No. If we get a partial deal, it would be with no further tariffs that could happen in October and December. By the way, let me point out, last official, trade meeting, G 20, nothing concrete happened. So what happens if there's no resolution from this trade deal, you'd probably see stocks fall a lot. That trade right now is the biggest risk factor for the global stock market, especially the US market, and especially the Chinese market. In anticipation of this meeting, the S and P 500 is down point as much as 0.2% on Thursday was down as much as 0.2% on Thursday. If you don't get this deal, you have tariffs that will go into effect across several sectors and many products in October and in December you would see the stock market do very badly if people expect the trade war to escalate.

It's simple.

The U.S. stock market would not do well in the event the trade talks between the U.S. and China do not lead to a resolution

This has been a much anticipated meeting, as the two leaders have exchanged rhetoric and barbs regarding trade recently, as markets have swung back and forth in an effort to anticipate an outcome.

Here's a break down of what the two countries' positions are and what would happen to stocks in a draconian scenario:

White House's Position

The White House's position is that China must pay a price for what Trump sees as unfair trade policies in recent decades. But when China strikes a rather conciliatory tone, the White House expresses interest in an agreement. On technology and intellectual property, the U.S. has said it views Huawei and other actors in China as a national security threat.

Recently, Trump has said the U.S. does not need a trade deal before the 2020 election, and that it is China that needs a deal more than the U.S. does. Wednesday, he told reporters that China "wants a deal more than we do."

China's Position

For the majority of the trade war to date, China played hard ball. If the U.S. was going to implement tariffs on Chinese goods -- and it has -- China will do the same to U.S. goods. And it has.

But the trade war has caused the Chinese economy to decelerate noticeably, as China relies heavily on exporting goods to other nations and the U.S.

This week, China has said that it is partial trade agreement with the U.S., days after making it clear that it is no longer interested in a broad-based agreement. The major condition for a partial agreement, China said, would be that the U.S. would cancel all tariffs that are in addition to existing ones. That means tariffs currently scheduled to go into effect in October and December would have to be cancelled.


If there is no resolution, stocks would certainly fall.

Although the S&P 500 is down 2.86% in the past month, it could fall further if there is no trade resolution. Wall Street has tabbed the trade war -- which has multiple material impacts on economic growth and earnings -- as the most important factor. While interest rates will respond to economic changes, investors are much more focused on a trade resolution.

For sectors specifically, steel stocks are extremely sensitive to tariffs and respond badly to further tariffs. Other industrials, like Caterpillar (CAT - Get Report) and Boeing (BA - Get Report) are always sensitive.

Apple (AAPL - Get Report) and Nike (NKE - Get Report) are two Dow Jones components that, while mitigating tariffs, would like to see the trade war end.

Semiconductor makers, especially those that supply Huawei, will be sensitive to a trade resolution or break-down. Those include Micron (MU - Get Report) , Qualcomm (QCOM - Get Report) and Qorvo (QRVO - Get Report) .

Caterpillar, Apple and Qualcomm are holdings in Jim Cramer's Action Alerts PLUS member club . Want to be alerted before Jim Cramer buys or sells these Learn more now.

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