Steve Mnuchin Is 100% Sure That Trade Deal Was 90% Done Before It Fell Apart

On Tuesday afternoon, a US official who spoke to Reuters seemed intent on calibrating market expectations for the G20 meeting between Donald Trump and Xi Jinping.

The odds of a “real” deal being struck are obviously low (the US isn’t expecting that) and while there’s a chance a ceasefire can be agreed that would avert additional tariffs, the only expectation is that the two strongman leaders will agree to restart formal negotiations.

Fast forward to Wednesday and CNBC managed to badger Steve Mnuchin into producing a positive-sounding headline. “We were about 90% of the way there and I think there’s a path to complete this”, Mnuchin said, referencing the 150-page draft agreement with Beijing that fell apart early last month.

Frankly, the reaction across markets and the way the soundbite is being billed across the financial media on Wednesday is probably overkill. Mnuchin went out of his way to play down expectations and regurgitate familiar talking points and he even presaged his “90%” comment by saying he didn’t want to “speculate” on whether there would be a deal by the end of the year. Here’s the clip:

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Remember, Mnuchin is always optimistic and has tried (and tried and tried) to avert further escalations. If you recall, Steve struck a fledgling deal with China 13 months ago, only to see it crash and burn within days as the protectionist contingent pushed back (it didn’t help that Steve Bannon publicly derided the plan, which would have simply entailed China buying more US products).

Mnuchin is most assuredly a trade dove, but whenever he’s managed to get the upper hand, Lighthizer and Navarro have always wrestled it back.

According to Bloomberg, the US may be willing to suspend the imposition of tariffs on an additional $300 billion in Chinese goods if Trump and Xi do agree to restart talks and China may be willing to take the threat of a rare earths export ban off the table as a sign of good faith.

In any case, markets will take whatever they can get right now and Mnuchin’s “90%” comment will work – at least for a few hours.

Remember, everybody knew the deal was “90%” done. Indeed, that’s why markets were so shocked when Trump announced, on May 5, that the US was hiking the tariff rate on $200 billion in Chinese goods.

Mnuchin’s CNBC interview is probably better summarized by the following lukewarm soundbite:

I’m hopeful that we can move forward with a plan … President Trump and President Xi have a very close working relationship. We had a productive meeting at the last G-20.

Where we were was “90%”. Where we are is in limbo.