Shares of e-commerce platform company Shopify (NASDAQ: SHOP) rose rapidly today on news that China and the U.S. are ratcheting down their trade war. Shopify’s e-commerce technology is used by small businesses and large companies alike, so any slowdown to the economy because of tariffs would likely impact Shopify’s business.
Shopify stock was up by 11.4% as of 11:02 a.m. ET.
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Investors are hoping consumer spending will stick around
The Trump administration said today that import tariffs on Chinese goods would fall to 30% over the next 90 days while the two countries hammer out a permanent trade deal. Previous tariffs on most imports from China were 145%. China, in turn, dropped its tariffs from 125% down to 10%
Companies of all sizes have been concerned that a trade war between the U.S. and China could hurt their businesses and slow the economy. China is the third-largest trade partner with the U.S., providing around 13% of all goods imported into the country. That’s important to Shopify because millions of businesses in the U.S. use the company’s e-commerce services to sell their goods. High tariffs mean a strain on its customers, which can, in turn, weigh down Shopify’s sales.
Worries over economic uncertainty have been high in light of tariffs, with a recent CNBC survey of CFOs showing that 60% believe a recession is coming by the end of this year. But Shopify investors were hopeful today that if China and the U.S. work out a trade deal, a worst-case scenario for the economy might be avoided.
Positive direction, but not out of the woods
It’s good to see the Trump administration trying to work out trade deals, but a permanent deal with the U.S. and China hasn’t been reached, and there are still many other tariff negotiations that need to take place with other countries.
Still, the news is certainly positive, and it comes on the heels of Shopify’s first-quarter results, in which sales rose by nearly 27% to $2.4 billion and gross merchandise volume (the dollar amount of orders on Shopify’s platform) rose nearly 23% to $74.8 billion.
Shopify investors should certainly keep a close eye on any new trade news that emerges, but these initial moves by both countries are a step in the right direction.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
