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Wall Street May No Longer Be Able to Shrug Off Trump’s Trade Wars


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<title data-rh="true">Wall Street May No Longer Be Able to Shrug Off Trump’s Trade Wars - The New York Times</title><meta data-rh="true" itemprop="inLanguage" content="en-US"/><meta data-rh="true" http-equiv="Content-Language" content="en"/><meta data-rh="true" name="robots" content="noarchive"/><meta data-rh="true" name="articleid" itemprop="identifier" content="100000006080552"/><meta data-rh="true" name="nyt_uri" itemprop="identifier" content="nyt://article/147fa056-f941-5408-b7b7-d3e325fc7aeb"/><meta data-rh="true" name="description" itemprop="description" content="For months, investors could just about live with the Trump administration’s trade skirmishes, but a big battle with China looms."/><meta data-rh="true" name="image" itemprop="image" content="https://static01.nyt.com/images/2018/09/05/business/dealbook/05db-markets1/05db-markets1-facebookJumbo.jpg"/><meta data-rh="true" name="byl" content="By Peter Eavis"/><meta data-rh="true" name="thumbnail" itemprop="thumbnailUrl" content="https://static01.nyt.com/images/2018/09/05/business/dealbook/05db-markets1/05db-markets1-thumbStandard.jpg"/><meta data-rh="true" name="news_keywords" content="International trade,Donald Trump,NAFTA"/><meta data-rh="true" name="usageTerms" itemprop="usageTerms" content="http://www.nytimes.com/content/help/rights/sale/terms-of-sale.html"/><meta data-rh="true" name="pdate" content="20180904"/><meta data-rh="true" name="utime" content="20180904232623"/><meta data-rh="true" name="ptime" content="20180904050006"/><meta data-rh="true" property="og:url" content="https://www.nytimes.com/2018/09/04/business/dealbook/wall-street-trump-trade-war.html"/><meta data-rh="true" property="og:type" content="article"/><meta data-rh="true" property="og:title" content="Wall Street May No Longer Be Able to Shrug Off Trump’s Trade Wars"/><meta data-rh="true" property="og:image" content="https://static01.nyt.com/images/2018/09/05/business/dealbook/05db-markets1/05db-markets1-facebookJumbo.jpg"/><meta data-rh="true" property="og:description" content="For months, investors could just about live with the Trump administration’s trade skirmishes, but a big battle with China looms."/><meta data-rh="true" property="twitter:url" content="https://www.nytimes.com/2018/09/04/business/dealbook/wall-street-trump-trade-war.html"/><meta data-rh="true" property="twitter:title" content="Wall Street May No Longer Be Able to Shrug Off Trump’s Trade Wars"/><meta data-rh="true" property="twitter:description" content="For months, investors could just about live with the Trump administration’s trade skirmishes, but a big battle with China looms."/><meta data-rh="true" property="twitter:image" content="https://static01.nyt.com/images/2018/09/05/business/dealbook/05db-markets1/05db-markets1-videoSixteenByNineJumbo1600.jpg"/><meta data-rh="true" property="twitter:image:alt" content="President Trump with Mexico’s trade negotiators on Monday."/><meta data-rh="true" property="twitter:card" 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class="css-sb57iz e345g291"><div id="sponsor-wrapper" class="ResponsiveAd-emptyAd--3yMTH"><div id="sponsor-slug" class="ResponsiveAd-sponsoredByAdSlug--11gFU"><p>Supported by</p></div><div class="ad sponsor-wrapper" style="text-align:center;height:100%;display:block"><div id="sponsor"></div></div></div><h1 class="css-ifnb0o ejekc6u0" itemProp="headline"><span>Wall Street May No Longer Be Able to Shrug Off Trump’s Trade Wars</span></h1><figure class="sizeMedium layoutHorizontal css-z723vq toneNews" aria-label="media" role="group" itemscope="" itemProp="associatedMedia" itemID="https://static01.nyt.com/images/2018/09/05/business/dealbook/05db-markets1/merlin_142875183_117e2088-e47e-4dd5-a64c-4809fd47bb32-articleLarge.jpg?quality=90&amp;auto=webp" itemType="http://schema.org/ImageObject"><div class="css-bsn42l"><span class="css-1dv1kvn">Image</span><img alt="" class="css-11cwn6f" 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Eavis</span></a></p></div></div><ul class="css-lyagax"><li><time class="css-pnci9c eqgapgq0" dateTime="2018-09-04">Sept. 4, 2018</time></li><li class="css-6n7j50"><div role="toolbar" aria-label="Social Media Share buttons, Save button, and Comments Panel with current comment count" class="css-hn080" data-testid="share-tools"><ul class="css-y8aj3r"><li class="css-ohqqbz"><a href="https://www.facebook.com/dialog/feed?app_id=9869919170&amp;link=https%3A%2F%2Fwww.nytimes.com%2F2018%2F09%2F04%2Fbusiness%2Fdealbook%2Fwall-street-trump-trade-war.html&amp;smid=fb-share&amp;name=Wall%20Street%20May%20No%20Longer%20Be%20Able%20to%20Shrug%20Off%20Trump%E2%80%99s%20Trade%20Wars&amp;redirect_uri=https%3A%2F%2Fwww.facebook.com%2F" target="_blank" rel="noopener noreferrer" aria-label="Share on Facebook"><svg class="css-1m3nqq9" viewBox="0 0 7 15" width="7" height="15" xmlns="http://www.w3.org/2000/svg"><path fill-rule="evenodd" clip-rule="evenodd" d="M4.775 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class="css-1i0edl6 e2kc3sl0">This may be the point at which investors have to start taking President Trump’s trade wars much more seriously.</p><p class="css-1i0edl6 e2kc3sl0">Fears about trade have at times weighed on stocks since mid-February when the Trump administration announced tariffs on steel and aluminum. But the Standard &amp; Poor’s 500-stock index is up nearly 9 percent this year, and much of those gains have come in the past two months, a move that took the stock market to a record high last week.</p><p class="css-1i0edl6 e2kc3sl0">The trade conflict between the United States and China may be on the verge of a sharp escalation. <a class="css-1g7m0tk" href="https://www.bloomberg.com/news/articles/2018-08-30/trump-said-to-back-200-billion-china-tariffs-early-as-next-week?srnd=premium" title="" rel="noopener noreferrer" target="_blank">Bloomberg reported on Thursday</a> that Mr. Trump wanted to go ahead soon with tariffs on $200 billion of Chinese products, adding to those already imposed on $50 billion of goods.</p></div><aside class="css-14jsv4e"><span></span></aside></div><div class="css-18sbwfn StoryBodyCompanionColumn"><div class="css-1h6whtw"><p class="css-1i0edl6 e2kc3sl0">Investors may have viewed Mr. Trump’s threats since February as negotiating tactics, and believed that he would be content with limited gains. That appeared to be the case over the past week, in which the White House worked toward a trade deal with Mexico and Canada that does not appear to radically remake the North American Free Trade Agreement.</p><p class="css-1i0edl6 e2kc3sl0">But there has been unease among many investors. Fund managers have ranked trade as their primary concern over the past few months, and as Mr. Trump’s statements have turned into action, some have positioned their investments for slower economic growth.</p><p class="css-1i0edl6 e2kc3sl0">Though last week’s Nafta negotiations sparked a rally in stocks, investors might not want to draw too much from the talks. Mexico and Canada are predisposed to compromise, given their huge dependence on the United States market. And the European Union, which typically takes a hard line in trade negotiations, has not agreed to anything yet.</p><p class="css-1i0edl6 e2kc3sl0">While China relies on the United States market, its leaders can offset the impact of $250 billion in tariffs, by measures like stimulating their economy and bolstering exports by letting China’s currency slide.</p><p class="css-1i0edl6 e2kc3sl0">China could also step up its retaliation against the United States, which may hurt American companies.</p></div><aside class="css-14jsv4e"><span></span></aside></div><div class="css-18sbwfn StoryBodyCompanionColumn"><div class="css-1h6whtw"><p class="css-1i0edl6 e2kc3sl0">That could put the stock market’s gains this year at risk. This summer’s rally has made stocks more expensive, which in turn makes them more vulnerable to negative news.</p><p class="css-1i0edl6 e2kc3sl0">How far could stocks fall if the trade conflict intensifies?</p><p class="css-1i0edl6 e2kc3sl0">Underlying stock market numbers give some guidance. The S. &amp; P. 500 is now trading at 17 times earnings that analysts expect over the next 12 months, according to figures from FactSet. The lowest valuation on the index during the trade tensions this year was just over 16 times expected earnings. The benchmark would have to fall more than 5.5 percent to trade at that lower multiple.</p><p class="css-1i0edl6 e2kc3sl0">A moderate market reaction to a stepped-up conflict with China may be justified given the uncertainty surrounding the negotiations. But any sign that the conflict could hit corporate earnings would deepen worries about future profits. If the great earnings boom that has recently driven stocks to new highs falters, the S. &amp; P. 500 would be at risk of a steep decline.</p><p class="css-1i0edl6 e2kc3sl0">Investors may comfort themselves with the thought that Mr. Trump may not want to risk a stock market rout ahead of the midterm elections in the United States. After all, he likes to trumpet the stock market’s nearly 30 percent ascent under his administration. On Thursday he <a class="css-1g7m0tk" href="https://twitter.com/realDonaldTrump/status/1035125176617365504" title="" rel="noopener noreferrer" target="_blank">tweeted</a>, “For all of you that have made a fortune in the markets, or seen your 401k’s rise beyond your wildest expectations, more good news is coming!”</p></div><aside class="css-14jsv4e"><span></span></aside></div><span></span><div class="css-18sbwfn StoryBodyCompanionColumn"><div class="css-1h6whtw"><p class="css-1i0edl6 e2kc3sl0">Investors now have to decide whether a much nastier fight with China fits into that bullish narrative.</p></div><aside class="css-14jsv4e"><span></span></aside></div><div class="bottom-of-article"><div class="css-1hc8e7p"></div><div class="css-k8fkhk"> <p><strong><a href="https://www.nytimes.com/newsletters/dealbook">Get the DealBook newsletter</a></strong> to make sense of major business and policy headlines — and the power-brokers who shape them.</p></div><div class="css-3glrhn">A version of 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Mexico and Canada are predisposed to compromise, given their huge dependence on the United States market. And the European Union, which typically takes a hard line in trade negotiations, has not agreed to anything yet.","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.14":{"__typename":"Dropzone","index":6,"bad":false,"adsMobile":false,"adsDesktop":false},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.15":{"__typename":"ParagraphBlock","textAlign":"DEFAULT","content":[{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.15.content.0","typename":"TextInline"}]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.15.content.0":{"__typename":"TextInline","text":"While China relies on the United States market, its leaders can offset the impact of $250 billion in tariffs, by measures like stimulating their economy and bolstering exports by letting China’s currency slide.","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.16":{"__typename":"Dropzone","index":7,"bad":false,"adsMobile":true,"adsDesktop":false},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.17":{"__typename":"ParagraphBlock","textAlign":"DEFAULT","content":[{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.17.content.0","typename":"TextInline"}]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.17.content.0":{"__typename":"TextInline","text":"China could also step up its retaliation against the United States, which may hurt American companies.","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.18":{"__typename":"Dropzone","index":8,"bad":false,"adsMobile":false,"adsDesktop":true},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.19":{"__typename":"ParagraphBlock","textAlign":"DEFAULT","content":[{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.19.content.0","typename":"TextInline"}]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.19.content.0":{"__typename":"TextInline","text":"That could put the stock market’s gains this year at risk. This summer’s rally has made stocks more expensive, which in turn makes them more vulnerable to negative news.","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.20":{"__typename":"Dropzone","index":9,"bad":false,"adsMobile":false,"adsDesktop":false},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.21":{"__typename":"ParagraphBlock","textAlign":"DEFAULT","content":[{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.21.content.0","typename":"TextInline"}]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.21.content.0":{"__typename":"TextInline","text":"How far could stocks fall if the trade conflict intensifies?","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.22":{"__typename":"ParagraphBlock","textAlign":"DEFAULT","content":[{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.22.content.0","typename":"TextInline"}]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.22.content.0":{"__typename":"TextInline","text":"Underlying stock market numbers give some guidance. The S. & P. 500 is now trading at 17 times earnings that analysts expect over the next 12 months, according to figures from FactSet. The lowest valuation on the index during the trade tensions this year was just over 16 times expected earnings. The benchmark would have to fall more than 5.5 percent to trade at that lower multiple.","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.23":{"__typename":"Dropzone","index":10,"bad":false,"adsMobile":false,"adsDesktop":false},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.24":{"__typename":"ParagraphBlock","textAlign":"DEFAULT","content":[{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.24.content.0","typename":"TextInline"}]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.24.content.0":{"__typename":"TextInline","text":"A moderate market reaction to a stepped-up conflict with China may be justified given the uncertainty surrounding the negotiations. But any sign that the conflict could hit corporate earnings would deepen worries about future profits. If the great earnings boom that has recently driven stocks to new highs falters, the S. & P. 500 would be at risk of a steep decline.","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.25":{"__typename":"Dropzone","index":11,"bad":false,"adsMobile":true,"adsDesktop":false},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26":{"__typename":"ParagraphBlock","textAlign":"DEFAULT","content":[{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26.content.0","typename":"TextInline"},{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26.content.1","typename":"TextInline"},{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26.content.2","typename":"TextInline"}]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26.content.0":{"__typename":"TextInline","text":"Investors may comfort themselves with the thought that Mr. Trump may not want to risk a stock market rout ahead of the midterm elections in the United States. After all, he likes to trumpet the stock market’s nearly 30 percent ascent under his administration. On Thursday he ","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26.content.1":{"__typename":"TextInline","text":"tweeted","formats":[{"type":"id","generated":true,"id":"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26.content.1.formats.0","typename":"LinkFormat"}]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26.content.1.formats.0":{"__typename":"LinkFormat","url":"https:\u002F\u002Ftwitter.com\u002FrealDonaldTrump\u002Fstatus\u002F1035125176617365504","title":""},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.26.content.2":{"__typename":"TextInline","text":", “For all of you that have made a fortune in the markets, or seen your 401k’s rise beyond your wildest expectations, more good news is coming!”","formats":[]},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.27":{"__typename":"Dropzone","index":12,"bad":true,"adsMobile":false,"adsDesktop":false},"$Article:QXJ0aWNsZTpueXQ6Ly9hcnRpY2xlLzE0N2ZhMDU2LWY5NDEtNTQwOC1iN2I3LWQzZTMyNWZjN2FlYg==.sprinkledBody.content@filterEmpty.28":{"__typename":"TwitterEmbedBlock","twitterUrl":"https:\u002F\u002Ftwitter.com\u002FrealDonaldTrump\u002Fstatus\u002F1035125176617365504","snapshot":"The news from the Financial Markets is even better than anticipated. For all of you that have made a fortune in the markets, or seen your 401k’s rise beyond your wildest expectations, more good news is coming!","hideMedia":false,"html":"\u003Cblockquote class=\"twitter-tweet\"\u003E\u003Cp lang=\"en\" dir=\"ltr\"\u003EThe news from the Financial Markets is even better than anticipated. For all of you that have made a fortune in the markets, or seen your 401k’s rise beyond your wildest expectations, more good news is coming!\u003C\u002Fp\u003E&mdash; Donald J. Trump (@realDonaldTrump) \u003Ca href=\"https:\u002F\u002Ftwitter.com\u002FrealDonaldTrump\u002Fstatus\u002F1035125176617365504?ref_src=twsrc%5Etfw\"\u003EAugust 30, 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