Last week, following a lackluster February payrolls report, Larry Kudlow showed up on Bloomberg TV to talk shop.
One of the topics that came up was whether Donald Trump was in a rush to get a trade deal with China done in order to try and juice the stock market, the president’s favorite indicator of presidential “success”.
When pressed specifically on whether it is or isn’t true that Trump has, at various intervals, pushed his trade advisers to get this done in the interest of boosting equities, Kudlow said this:
Unfortunately for Larry, Trump was wrapping up his own comments to reporters on the south lawn around the exact same time. When asked about the trade deal and the market, Trump struck a different tone:
Bear in mind that Trump didn’t have to say that. Nobody asked him if “we’re going to see a very big spike in the stock market” once the trade deal with China is done. He offered that up on his own.
The bottom line is that everyone knows Trump is concerned about US equities and common sense dictates that the president is hoping he can extend the YTD rally on Wall Street by sealing the deal with China.
Why is that a “bad” thing? Well, it’s not – necessarily. In fact, if you think this whole trade charade was a waste of time, the sooner it’s over the better.
But if you’re in the camp that believes the Sino-US trade war has the potential to end in an agreement that benefits America, well then you don’t want to hear that Donald Trump, dealmaker extraordinaire, is rushing things along just so he can get an ego-boosting pop in the Dow.
As we wrote earlier this month, it’s possible that Trump’s hankerin’ for a stock surge will end up manifesting itself in better terms for China, something trade hawks like Bob Lighthizer would be aghast to concede.
“His enthusiasm for a pact could shape crucial decisions such as balancing Chinese pressure to lift tariffs immediately against trade hawks’ arguments to initially maintain duties as leverage to assure good behavior by Beijing”, Bloomberg said on March 6, adding that Trump’s eagerness “could provide an opening for China to seal a deal without giving major ground.”
Well, on Thursday, reports indicate that the fabled Trump-Xi summit (which everyone expects will double as a signing ceremony) has been pushed out at least until April.
That’s according to three people who spoke to Bloomberg, whose Jennifer Jacobs adds that the “hoped-for summit at Trump’s Mar-a-Lago resort will now take place at the end of [next month] if it happens at all.”
China, apparently, would prefer a formal state visit as apposed to a ridiculous photo op with Trump at his resort. Xi’s staff, Bloomberg says, “scrapped plans for a potential flight to the US” later this month.
For his part, Bob Lighthizer has generally stuck to the script from his testimony on Capitol Hill, where he variously suggested that any trade deal is still far from done. He also emphasized (in the most explicit terms possible), that enforcement is going to be very, very difficult. This week, Bob persisted in the “major issues” line when it comes to questions about how things are progressing and sure enough, IP theft still appears to be a sticking point.
For what it’s worth, Barclays recently “upgraded” their view on a potential resolution to the conflict. “The latest developments suggest an increasing probability of a better-case scenario that would see immediate removal of the 10% tariffs and an easing in the tech war”, the bank wrote on March 8, adding that if you ask them, “Trump’s eagerness to strike a deal and need to have a ‘win’ after the breakdown of the Trump-Kim summit have increased the likelihood of the US accepting China’s demand for removal of the 10% tariff.”
Beijing is also reportedly concerned that Trump will do something manifestly silly, like walk out at the last minute, or push Xi’s head into a piece of chocolate cake or race off in a golf cart and leave the Chinese President standing in the middle of a fairway somewhere. “Chinese officials have also prickled at the appearance of the deal being one-sided, and are wary of the risk of Trump walking away even if Xi were to travel to the US”, the above-linked Bloomberg article reads.
In any event, risk assets weren’t particularly amused with this delay. US equity futures fell, European stocks trimmed gains and the offshore yuan dropped sharply as the headlines started the cross.
Wall Street on Wednesday erased last week’s losses to trade at a four-month high.