In case US equities needed an excuse to extend gains on a Friday when stocks were already riding high following a better-than-expected jobs report, the USTR and Beijing jointly announced progress after yet another principal-level trade call.
“The US and China had constructive trade talks today”, the USTR said, adding that progress was made “in a variety of areas”.
The chat – between Bob Lighthizer, Steve Mnuchin and Chinese Vice Premier Liu He – comes amid concerns that Beijing sees no real path to a longer-term deal with the US.
The two sides “are in the process of resolving outstanding issues”, the USTR went on to say.
For their part, the Chinese side described the talks as “constructive”. “[We’ve achieved] consensus in principle”, the Chinese Ministry of Commerce said, in a statement.
The timeline on the nebulous “Phase One” trade agreement which has served as a catalyst for risk assets for the better part of three weeks was thrown into doubt on Wednesday when Chile canceled APEC due to local unrest (and the term “local” assumes you don’t view it in the wider geopolitical context, which is crucial).
As Nomura’s Charlie McElligott wrote Thursday, the key thing to understand about all of the absurd wrangling is that market participants no longer expect a grand deal. The “best” case scenario now is that Trump agrees to take the planned December 15 tariff hike off the table.
And yet, doing that would strip the US president of leverage over the Fed at a time when Jerome Powell and company have telegraphed a desire to pause rate cuts after easing at three consecutive meetings.
Earlier Friday, Larry Kudlow said the December tariffs are still in play until the “Phase One” deal is complete. Chapters around agriculture, financial services and FX are almost done, Larry told Bloomberg, adding that there’s still quite a bit to do on forced technology transfer and enforcement.
