Daily Management Review

China Trade Deal 'Close', Says Trump, But Provides No Specifics


While hinting that the so called ‘phase one’ of a trade deal will with China could be completed “soon”, United States president Donald Trump denied to provide any further details about the ongoing negotiations while making the comment in a campaign-style speech and vouching for the economic performance of his administration.
The markets had been intently awaiting what Trump would say on the trade war with China and the possibility of a trade agreement between the countries during his speech at The Economic Club of New York.
The markets rarely reacted after the Trump’s comments because no major policy announcement was made in the speech. Markets and business circles were abuzz before the speech as people companies, investors and market watchers anticipated the possibility that Trump could make an announcement about the venue and the date for the so called “phase one” trade agreement with China where he and Chinese president Xi Jinping would sing the agreement. However they were utterly disappointed after the speech.
While saying that the US Chinese negotiators were “close” to a “phase one” trade deal, in the speech, Trump largely spoke about his now well known rhetoric of how china cheats on trade with the US.
“They are dying to make a deal. We’re the ones that are deciding whether or not we want to make a deal,” Trump said, echoing remarks he made on Saturday.  “We’re close,” he said. “A significant phase one trade deal with China could happen. Could happen soon. But we will only accept a deal if it’s good for the United States and our workers and our great companies.”
If China does not make a deal with the United States, he would raise tariffs on Chinese goods “very substantially”, Trump said. “And that’s going to be true for other countries that mistreat us too,” he added.
Some adjustments to tariffs already in place could be included in the phase one agreement, White House economic adviser Larry Kudlow later told the media. However he also added that it is likely that neither the US not China would would agree to such steps “until the entire deal is put together.”
There was little upward or downward movement in US stocks during and after Trump’s speech. There was just a 0.3 per cent rise in the S&P 500 in afternoon trade which was still close to its record high. There was an equal subdued reaction in the bond and foreign exchange markets.
“The only thing that’s maybe new is that he did not announce a date and a time for a signing ceremony,” Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York, said of the speech. “Where markets had been hoping for that, those hopes were dashed,” he added, saying that buying of riskier assets faded when it became apparent that no major announcement would be made.