“The Wall Street Journal story on the China Deal is completely wrong, especially their statement on Tariffs”, Donald Trump tweeted, at 9:06 AM, on Friday. “Fake News. They should find a better leaker!”, the president went on to shout.
It seemed like an ominous sign. As did the tweet he sent a few minutes earlier: “Record Stock Market & Jobs!”
It appeared as though Trump was setting the market up for disappointment, just prior to a scheduled press conference in China.
Fast forward an hour, and Chinese officials said there is, in fact, an agreement on the text of a deal. The US is set to remove tariffs on Chinese goods in phases, while China will increase imports from the US and others. Both sides have agreed not to impose the December 15 tariffs.
US equities rose, the yuan rallied and Treasurys fell in the knee-jerk reaction to the headlines.
The agreement, Beijing says, is consistent with China’s reform goals. It contains nine chapters. The US “needs to expand energy cooperation with China”, officials insist.
Importantly, further details of the deal won’t be announced today. No details on the agricultural purchases are ready yet.
Earlier, reports indicated that officials in Beijing were wary of committing to lofty targets on farm purchases, which the White House has insisted could total as much as $50 billion annually as part of the “Phase One” trade deal between the world’s two largest economies.
That number was subjected to skepticism, especially without tariff relief. Chinese buyers had been relying on quotas to make the “goodwill” purchases that paved the way for talks between Liu He, Steve Mnuchin and Bob Lighthizer over the past two months.
New waivers were granted last week, allowing for more “feel-good” soybean buying, designed to mollify Trump as the talks progressed.
But even with tariff relief (which would allow Beijing to roll back some retaliatory measures, obviating the need for more waivers), China likely can’t hit the mark without diverting billions in purchases from some of the trade partners Beijing has relied on amid the dispute with the US.
Going away from, or otherwise alienating, those countries could prove to be a mistake in the event Trump changes his mind and reinstates the tariffs.
Friday’s news conference in Beijing appears to have placated markets. Traders were on edge as conflicting reports cast doubt on the viability of the fledgling deal and thereby the risk asset gains news of its consummation engendered.
On Thursday, stocks rose amid reports that the two sides had reached an agreement “in principle” that would see the White House scrap Sunday’s planned escalation, and roll back 50% of existing levies. Just minutes before the opening bell on Thursday, Trump said the two sides were “VERY” close to an agreement.
Kayla had an amusing tweet just ahead to the presser in Beijing.
China says briefing delayed a half an hour, to 10am ET…
… which means it will begin just as the House Judiciary Committee is being gaveled in to vote on articles of impeachment.
— Kayla Tausche (@kaylatausche) December 13, 2019