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US-China ‘Phase One’ Deal Seen Delayed, Could Be Signed In Famous US Farm State Switzerland

Who's surprised?

Surprise! The signing of Donald Trump’s vaunted “Phase One” trade deal with China may be delayed until December amid wrangling over the best venue for a photo op with Xi.

After Chile canceled APEC last week, the White House was quick to insist that the timeline around getting the interim agreement done hadn’t changed.

“As of now, it appears APEC will not occur in Chile, and it’s our understanding the organization does not currently have a secondary site prepared. We’re awaiting potential information regarding another location”, the White House said in statement. “We look forward to finalizing Phase One of the historic trade deal with China within the same time frame, and when we have an announcement, we’ll let you know”.

Read more: Chile Cancels APEC In Another Example Of Global Fallout From Local Unrest

Subsequently, US officials tossed out a variety of options for where Trump and Xi might meet.

Trump insisted that somewhere in the US would be ideal, and locales like Alaska, Hawaii and, of course, Iowa, were bandied about.

Now, it looks as though the deal – assuming it’s signed at all – will be inked in Europe. Sweden and Switzerland are possible locations, Reuters said Wednesday, citing a Trump administration official.

Last time we checked, neither of those two countries are in Iowa which, as it turns out, is no longer a likely venue.

In addition to the debate around the “best” location for the face-to-face meeting, the terms of the deal aren’t yet finalized. Indeed, it’s still possible the deal won’t even come to fruition.

The official, who asked not to be named, told Reuters that although a deal is more likely than not, there are no guarantees. Far from it.

As you might imagine, China is said to be using the impeachment probe as leverage. “The official said China was believed to see a quick deal as its best chance for favourable terms, given pressure Trump is facing from a congressional impeachment inquiry as he seeks re-election in 2020”, Reuters says.

Over the past several days, it’s become increasingly clear that the Chinese will demand meaningful tariff relief in exchange for Xi’s signature. The Trump administration is said to be debating the removal of duties put in place on September 1 and market participants have widely speculated that the scheduled escalation on December 15 will have to be shelved in order to convince Beijing to acquiesce to the interim agreement.

Meanwhile, Chinese officials are said to be skeptical of the prospects for a longer-term deal that addresses the structural issues at the heart of the dispute. A sweeping agreement like that which Trump has variously promised to deliver is generally seen as far-fetched, it not totally unrealistic.

Read more: ‘Look, This Isn’t A Surprise To Anyone’: Nomura’s McElligott Weighs In On Latest US-China Trade Scoop


11 comments on “US-China ‘Phase One’ Deal Seen Delayed, Could Be Signed In Famous US Farm State Switzerland

  1. “The Art of the (non)Deal” #MAGA

  2. So, they can’t agree on the simple thing of where to sign the agreement and we’re supposed to believe the narrative that they have made meaningful progress on any terms?

    Basically the trump admin is so psychotically delusional they believe their own propaganda. I envision this general scenario: the US team walks into the room tells the Chinese what they want to happen; assume the Chinese are sycophants too;!walk out and tell the press that they made meaningful progress while the Chinese have not agreed to anything.

  3. Stephen in Canada

    “The Art of the (non)Deal” – seems a bit harsh! The Art of the Fake Deal seems rather more in keeping with the language and other trade “accomplishments” so far by the current leader of the US Administration….

  4. Huh, I would have thought the Trump club in Doral would be the perfect choice. 😉

  5. Possible senario: Trump will raise taxes in December. He is like a kid with one water balloon left to lob, he won’t be able to resist it.

  6. Love the image, though it is a bit worrisome. Trump, Mnuchin, Mulvaney, Bolton (buh-bye), Navarro, and Suzie Q — that’s our negotiating team? I mean, what could go wrong?

  7. You know, if you look at the people arranged on both sides of the table in the picture above the article it strikes me that there is not one idiot on the Chinese side. Soooo one sided.

  8. It seems that the next actual development will be the Great Trump Cave To Xi.

    Meaning, having given up on getting any real IP, market access, or economic reform stuff from China – deferring these to “Phase 2 or 3” is the same as giving up – all Trump can get from China now is resumed ag purchases.

    In return, Xi is evidently hanging tough on getting the US tariffs removed. Every last tariff? Maybe not, but remove the planned Dec ’19 tariffs and the Sep ’19 tariffs and reduce or remove the Sep ’18 tariffs, and that’s most of the tariffs, and CNY/USD takes care of the rest.

    The Great Cave seems likely to happen in December, given the planned Dec ’19 tariffs and Trump’s need to score a “win” to distract from his impeachment and this week’s election setbacks.

    That will foreclose another Fed cut, which will make Trump mad, but the Fed has pumped something like $200BN of liquidity into the economy in less than a month (repo + TBL purchases) and will pump in at least another $200BN and likely more over the next month or two. That’s better than another 25 bps any day.

    Powell caved (little “c”) to Trump, next is for Trump to Cave (big “C”) to Xi.

    If this is indeed what happens, why should we care about negative economic data? Whatever the ISM or PMI do, the market can say that’s looking in the rearview mirror, we’re now in a Post-Cave world.

    If US employment or consumer spending fall very sharply, that will get the market’s attention. But manufacturing, trade, orders, estimates, capex – who cares? “All will be well again once the nasty tariffs go away.” I don’t know if that will really prove true, but the market can believe it for a couple quarters or more.

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