What happened
Shares of Michaels Companies (MIK) rose as much as 12.3% on Tuesday. By 1:45 p.m. EST, the arts and crafts retailer's stock had cooled down to a gain of 7.5%.
So what
This jump was powered by an early-morning Trump tweet, which stated that the first phase of a comprehensive trade deal with China will be signed on Jan. 15. A second stage will commence at an unspecified later date.
A stable, tariff-free trade relationship between China and America would be good news for Michaels, which has been suffering rising product costs as a direct result of the trade-war tariffs.
Image source: Getty Images.
Now what
The signing ceremony in January will formalize a loose agreement between the two countries that ends the trend toward escalating tariffs and cuts the tariff rate in half for some goods. Michaels' management had been preparing to tackle new import tariffs on roughly $450 million of imported goods in 2020, based on the proposed December increase that never took effect. The company is exposed to so-called List 3 tariffs on about $400 million of its annual product orders, and should see a significant bottom-level boost as those tariff rates are cut in half.
So it's no surprise to see Michaels investors celebrating every indication of looser tariff reins on this important product procurement flow. The stock is now trading 66% above its 52-week lows, but share prices also stand 50% below their annual highs. Michaels was a volatile ticker this year.
