When it comes to the stalemate in the U.S.-China trade war, any news that isn’t related to additional tariffs is good news.
Over the past month, the market has been forced to digest negative headline after negative headline in the wake of the U.S. moving ahead with the imposition of tariffs on $34 billion in Chinese imports on July 6. Beijing immediately responded and since then, the Trump administration has published a list in conjunction with 10% duties on an additional $200 billion in Chinese goods, threatened to hike that rate to 25% and announced the official date for the imposition of tariffs on $16 billion in imports, completing the two-step process of slapping levies on $50 billion in items in conjunction with the 301 probe (the $34 billion in duties that went into effect on July 6 was the first of two tranches, the second will go into effect on August 23).
An incredulous China has responded with more yuan weakness, a declaration that fiscal policy will be “more proactive” going forward and, most recently, the announcement of differentiated tariffs on $60 billion in U.S. goods which would hypothetically take effect “as soon as” Trump moves forward with the next round of 301-related duties.
All of this after Steve Mnuchin effectively lost a battle with Peter Navarro for control of the trade narrative back in May. You’ll recall that on May 19, Mnuchin actually managed to strike a deal with Chinese Vice Premier Liu He that called for China to buy more U.S. goods. That was on a Saturday and it came at a time when Navarro was sidelined from the talks after behaving badly in Beijing. A day later (so, on Sunday, May 20), Mnuchin appeared on Fox News and declared the trade war “on hold“.
It was all down hill from there. A backlash from the protectionist contingent prompted Trump to change his mind and before you knew it, Steve Mnuchin found himself sidelined, forced to sit idly by as the U.S. plunged the world into a trade war.
Given all of that, I suppose it’s somewhat comforting that the Chinese Ministry of Commerce on Wednesday said the U.S. has invited a Chinese delegation to Washington for talks in “late August”. Here’s the official statement, translated:
At the invitation of the US, Wang Fuwen, deputy minister of the Ministry of Commerce and deputy representative of international trade negotiations, planned to visit the United States in late August, and negotiated with the US delegation headed by US Deputy Treasury Secretary Marpas on the Sino-US economic and trade issues of mutual concern.
The Chinese side reiterated that it opposes unilateralism and trade protectionism and does not accept any unilateral trade restrictions. China welcomes dialogue and communication on the basis of reciprocity, equality and integrity.
Treasury futures fell on the news on heavy volume and generally speaking, this appears to have sparked a welcome bout of risk-on sentiment across assets after a day that saw emerging markets crumble amid Turkey jitters and Tencent’s egregious quarter.
We’ll see what comes of this, but it’s probably fair to say that no one should get their hopes up.
After all, it was just Wednesday morning when Trump tweeted this:
Our Country was built on Tariffs, and Tariffs are now leading us to great new Trade Deals – as opposed to the horrible and unfair Trade Deals that I inherited as your President. Other Countries should not be allowed to come in and steal the wealth of our great U.S.A. No longer!
— Donald J. Trump (@realDonaldTrump) August 15, 2018