Sure, there’s a ton of skepticism out there about whether chocolate cake diplomacy has any hope of breaking the seemingly intractable trade stalemate between the U.S. and China, but one person who thinks everything should be fine is U.S. Trade Representative Robert Lighthizer.
“I would be very surprised if the dinner was not a success,” Lighthizer told reporters in Buenos Aires on Friday, ahead of what the market is pitching as one of the most important geopolitical events of 2018.
Lighthizer is a key figure in this ongoing train wreck, so one assumes the market will interpret these comments as a sign that the administration is expecting progress.
But don’t forget that Navarro is going to attend the dinner, which I suppose means it’s entirely possible that the whole thing devolves into a prison mess hall fight complete with Peter trying to gouge out someone’s eye with a fork.
On “new” (read: old) NAFTA, Lighthizer called the deal “a magnificent agreement” on the way to saying that when it comes to the metals tariffs, he’s “hoping we come to a conclusion before long with respect to both countries,” although he admits it’s “difficult to put a time frame on negotiations”.
Earlier on Friday, we brought you some highlights from Goldman’s Trump-Xi preview and suffice to say the bank thinks the “most likely” outcome is a further escalation considering the fact that coming to terms on an array of complex issues over dinner is impossible.
Read more
Chocolate Cake Diplomacy Gets Biggest Test Yet As Trump-Xi Meeting Dominates Global News Cycle
For their part, BofAML generally agrees.
“Our base case is that there will be no agreement at the upcoming Xi-Trump meeting, just a pledge to keep working towards one”, the bank writes in a note dated Friday.
“We have long been of the view that there is ‘no pain no deal’ when it comes to the US-China trade tension”, the bank continues, adding that “the Trump administration will unlikely scale back the tariff measures unless he sees pain in US political support, the economy or stock market.”
There has of course been some “pain in the stock market”, but Trump has just blamed that on Jerome Powell, a contention the Fed chair was effectively forced to lend credence to on Wednesday by sparking a rally with dovish comments in New York.
The bottom line, for BofAML anyway, is that “so far the costs for the US are simply too small to motivate a serious negotiation towards a deal.”
Assuming they agree on a truce and buy time, what will happen? This is the real question. Slow grind up waiting for the next meeting or slow grind down dominated by pessimism? I believe markets will simply focus on sectors data (revenue growth, shipments, etc..) and will give up to play the expectations game.
Trump did achieve what every narcissistic egomaniac seeks. All eyes are on him. He will proclaim some sort of “victory” regardless. If he still craves attention, he will prolonged the situation, which he created in the first place. The Administration could have focused and achieved the main goal of IP theft through other more diplomatic means. However, it would not have been as attention grabbing.
You say “narcissistic egomaniac” whereas my Psychiatrist colleague says he’s more precisely a “narcissistic psychopath” but the U.S. Psychiatry Ass’n can’t publish such a diagnosis, since they haven’t done an in-person evaluation.