At the very least, the planned December 15 tariff escalation will be delayed if there’s no agreement reached by then, sources told the South China Morning Post on Thursday.
Risk assets got a minor boost from the headlines, which come amid rampant confusion around the state of the fraught negotiations, which are either falling apart or going swimmingly, depending on the day and who you ask.
Wednesday was defined by a Reuters story which cited “experts” and people close to the White House as suggesting that the “Phase One” trade deal at the heart of recent market optimism may be delayed until 2020. That sent US stocks tumbling, and although equities trimmed losses by the close on Wall Street, the S&P nevertheless logged a second consecutive daily decline for the first time since October 8.
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“Chinese and American trade negotiators continue to wrestle with exactly which trade tariffs will be removed as part of a ‘phase one’ deal between China and the United States and under what conditions”, SCMP said Thursday, citing sources from both sides.
Earlier this week, Bloomberg outlined the contours of the discussion around prospective tariff relief. Suffice to say the situation is fluid.
“There is still some modicum of optimism that a watered-down deal can be reached before new US tariffs go into effect on December 15, but even if the deal proves elusive, sources say it is likely they will be at least postponed”, SCMP goes on to say.
That’s good news. That escalation would entail Trump slapping levies on some $160 billion in Chinese goods, the majority of which are consumer items.
The composition of the list is a factor in the discussions, and sources said neither side is excited about the prospect of tariffs on smartphones and other consumer electronics.
The problem, obviously, is that Trump has repeatedly said that if there’s not a deal by that December 15 deadline, he will move ahead with those tariffs. His surrogates have made similar threats. On Tuesday, the US president even suggested he’d hike existing tariffs barring an agreement in the next few weeks.
But one source close to the White House says that may be bluster. “I don’t think you’ll have something big delivered by December 15, but I do think that you will have something that forestalls the tariffs because it is in both sides’ interests”, the source said.
Fingers crossed, although it’s worth noting that another delay will only serve to prolong the uncertainty and underscore the farcical nature of this charade.
This could also indicate that China is playing for time, in the hope that Trump’s political capital deteriorates enough during the impeachment proceedings to make him desperate for a deal.
Earlier Thursday, risk assets drifted cautiously higher on reports that Liu He is still “cautiously optimistic”.
