Goldman: Huawei Retreat Is ‘Potential Unexpected Market-Friendly Outcome’

Goldman: Huawei Retreat Is ‘Potential Unexpected Market-Friendly Outcome’

To be clear, not everybody was excited on Saturday about Donald Trump's conciliatory remarks regarding Huawei, China's besieged national champion. In comments to reporters following the G20, Trump suggested on a number of occasions that Huawei will be able to purchase products from US companies, something the tech giant was effectively banned from doing last month when the Commerce department added it to the entity list. It wasn't clear whether Trump would, in fact, remove Huawei from the list
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4 thoughts on “Goldman: Huawei Retreat Is ‘Potential Unexpected Market-Friendly Outcome’

  1. I’m interested in how the Chinese government may assess the situation now.

    They know:
    – Election in 17 months, a fairly short time.
    – Outcome uncertain, with history suggesting incumbent President usually wins when economy is in its current state, but midterms and polls suggesting this incumbent may be weaker than history implies.
    – Incumbent sensitive to US stock indicies.
    – A “deal” with the US is not a deal until ratified by Congress, normally a lengthy process, and now one chamber is controlled by the opposition.
    – A ratified deal is still not a permanent deal, with this incumbent.
    – An unratified deal is vulnerable to re-negotiation if the incumbent is replaced (US regime change)
    – Status quo (existing tariffs remain, new tariffs on hold, uncertainty high) is economically damaging to both countries, with negative effects in the US starting to become evident in some data.

    Would the Chinese government conclude that their leverage to make an unratified deal with the incumbent will rise as the election approaches, while the value of such an unratified deal will decline as a potential US regime change approaches, such that if they cannot reach a favorable unratified deal by a certain date then they are better off “running out the clock”?

    After all, imagine negotiations drag on to June 2020; would Trump really slap 25% tariffs on am remaining China trade + death sentence on Huawei and watch the S&P plunge 20% into Election Day?

  2. This is all the process of manufacturing potential Bullish events for the equity market’s consumption…First we create Huawei crisis to look tough ..that is Bearish..We surround it with a trash load of Fed speak…..that negates the effect it and it is after a time placed on the shelf as a bullish event when ..voila is rescinded…After a time we look like a paper tigers but not if it solves the trade deal . The fact that the trade deal does not solve any issues that existed before the trade crisis does not seem to matter because now Trump (or whoever ) is a hero for saving the economy… Known in other circles as Business as Usual….!!!! What is it that is so difficult to see in this especially as it is so oft repeated?

  3. That is how it looks from the US side. But you need two to tango. How does it look from the Chinese side? Are they content to be used as a reactive prop in the Trump Show?

    After all, the Chinese can trigger a fall in US stocks, by conduct or statements about the negotiations. Not without harm to themselves, but Xi doesn’t have an election date.

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