There was more trouble in that paradise we call markets on Tuesday.
23 hours after blindsiding traders with a series of pre-dawn tweets taking aim at Brazil and Argentina for currency devaluation, Donald Trump told reporters in London that it may be better to wait until after the election for a trade deal with China.
“I have no deadline, no”, the US president said, speaking to the media ahead of a NATO summit that’s expected to be highly contentious. The only thing that matters, Trump mused, “is if I want it”.
That didn’t go over well with US equity futures, which moved sharply lower on the headlines.
We’re now off by some 1.7% since just prior to Trump’s Monday morning broadside against LatAm, although a good portion of that is attributable to lackluster US economic data.
Trump went on to say that it might be better to wait until after the election for a deal with Beijing, something nobody wants to hear given the looming deadline for scrapping the next round of planned tariffs which, barring a breakthrough, will go into effect on December 15, targeting some $160 billion in Chinese goods.
Here’s the full quote:
I like the idea of waiting until after the election for the China deal. But they want to make a deal now and we’ll see whether not the deal is going to be right. It’s got to be right. The China trade deal is dependent on one thing: Do I want to make it? Because we’re doing very well with China right now and we could do even better with the flick of a pen.
To be clear, nobody believes the two sides will make progress beyond the “Phase One” agreement in an election year. Chinese officials told Reuters that discussions around “Phase Two” likely will not commence in 2020. Further, it’s by no means clear that the issues at the heart of the dispute will ever be definitively “resolved”, which means the odds of the two sides coming to terms on anything other than an interim arrangement that allows for the rolling back of some tariffs, are extremely slim.
And yet, the news flow over the past week – and especially over the past two days – seems to cast considerable doubt on the notion that the “Phase One” agreement will come to fruition in the next two weeks. On Monday, Wilbur Ross said more tariffs will take effect if no deal is reached. He called December 15 a “logical deadline”, which is presumably what Trump was responding to on Tuesday in London.
Trump needs to be careful. Monday brought rumors that Beijing may soon unveil the long-planned “unreliable entities” list and Beijing also rolled out sanctions threats against a handful of US NGOs in response to the Hong Kong bill. This is a delicate juncture, especially given that Xi is probably predisposed to waiting for the impeachment proceedings to play out so Beijing can assess how much political capital Trump loses inside the Beltway.
It’s also worth noting that Chinese officials have, at various intervals, suggested they could wait until after the 2020 election to get serious about the talks again, and Trump himself has suggested as much, repeatedly referencing Beijing’s purported desire to negotiate with “Sleepy Joe”.