Trade War? What Trade War? The fears that President Donald Trump’s threats of tariffs would plunge the globe into a devastating trade war is easing quite a bit. The Wall Street Journal reported that “China and the U.S. have quietly started negotiating to improve U.S. access to Chinese markets, after a week filled with harsh words from both sides over Washington’s threat to use tariffs to address trade imbalances,” people with knowledge of the matter said.

The talks, which cover wide areas including financial services and manufacturing, are being led by Liu He, China’s economic czar in Beijing, U.S. Treasury Secretary Steven Mnuchin and U.S. trade representative Robert Lighthizer in Washington according to the Journal.

On Fox News Sunday, U.S. Treasury Secretary Steven Mnuchin said that “Such a deal would include Beijing opening its markets further to U.S. exports, reducing its tariffs and stopping pressure on U.S. companies in China to transfer their technology to Chinese joint-venture partners, he said.”

So if a trade war is averted than the sell-off that we have seen in the stock market and commodities should be overdone. While industrial metals are still skeptical that a trade war can be averted oil prices, on the other hand, are not being fooled.

Oil has rallied as it is becoming obvious to even the most battled-hardened bears that the global market seems to be in balance. Even as we see U.S. production rising, inventories are going the other way. The Trump tax cuts has helped spur the economy, lift poor out of poverty and has improved demand expectations from the retail and commercial side. Consumer confidence which is at the highest level since 2004 has lifted expectations of lower incomes that have finally seen some hope and an uptick in wages.

This has led to record demand for gasoline and is driving up retail prices. Trilby Lundberg, the Princess of Petro, says that the average U.S. price of regular-grade gasoline increased by 7 cents a gallon over the past two weeks to $2.66.  That put prices 32 cents a gallon higher than it was at this time last year.  The highest average price in the contiguous 48 states was $3.54 in the San Francisco Bay area. The lowest was $2.22 in St. Louis according to Lundberg. The average price for diesel fuel rose a penny, to $3.01.