On Sunday evening, Donald Trump took to Twitter to tout the “Phase One” trade “deal” he struck with Chinese Vice Premier Liu He on Friday afternoon in Washington.
The contours of the deal are not well-defined. The agreement is nebulous, has not been put in writing and involved no concessions from Beijing on key sticking points including industrial policy and forced technology transfer.
Frankly, the only thing anyone knows with certainty is that the October 15 tariff escalation has been delayed and that China has agreed to buy more US farm products.
Trump – whose Sunday evenings are usually spent tweeting in all-caps about current events – extolled the virtues of what he’s now calling “My deal with China”. Beijing will “IMMEDIATELY start buying very large quantities of our Agricultural Product, not wait until the deal is signed over the next 3 or 4 weeks”, he insisted, in a senselessly bombastic barrage.
In case that somehow wasn’t clear enough, he added that “THEY HAVE ALREADY STARTED!”
As for the rest of “his” deal with Liu, the president says preparations are underway for “financial services and other deal aspects”. He then called his relationship with Xi “very good”, on the way to saying he’ll “finish out the large Phase One part of the deal, then head directly into Phase Two”. (And yes, this is now overtly silly to the point that one almost feels sorry for Trump.)
In a note out Saturday, Goldman tried to make sense of “Phase One”.
“China appears to have agreed to $40-50bn of purchases of US agriculture and agricultural policy changes, currency transparency, and opening market access for US financial services firms [but] there is still slight uncertainty regarding the details of the agreement”, the bank wrote, adding that “the White House has indicated that the details of the deal will be written up over the next four weeks, with an expectation that the agreement would be signed by Presidents Trump and Xi at the APEC Summit in Santiago, Chile in mid-November”.
Goldman goes on to call “Phase One” “fairly straightforward [in] certain aspects” – not exactly a resounding vote of confidence. Still, the bank says “there appears to be a fairly low risk that the ‘Phase One’ deal falls through”.
Fingers crossed on that.
Late in the session on Friday, US equities trimmed gains into the close as details (or, more aptly, a lack thereof) around the agreement hit the tape. Ultimately, stocks come into Monday having snapped a three-week slide.
Traders were particularly disappointed that no decision was made on whether to impose 15% tariffs on $160 billion in Chinese goods come December 15. That escalation would target a significant amount of consumer goods (originally, that tranche was part of the September 1 escalation, but on August 13, the administration split the targeted products into two lists in order to avoid pushing prices higher into the holiday season).
“At this point, we see a 60% chance that the announced 15% tariffs on List 4B will take effect, though a delay until early 2020 is likely in our view given the proximity of the December 15 deadline to the Christmas holiday”, Goldman went on to say on Saturday afternoon. “In light of the complexity of the issues in Phase 2, we would not expect a decision on the December 15 tariff round until shortly before the deadline”.
Getting back to the president, he still isn’t sure if he’s getting through to everybody, which is why he felt it necessary to tweet the following, seconds after the comments cited above:
CHINA HAS ALREADY BEGUN AGRICULTURAL PURCHASES FROM OUR GREAT PATRIOT FARMERS & RANCHERS!