Ring Ring
A deal between the US and China on trade still proves to be illusive. The 90-day truce that both sides negotiated at the beginning of May allows for a further two months of negotiating before the deadline becomes a real risk. However, what has likely concerned the market meanwhile is the lack of progress on a deal and even the apparent deterioration in sentiment between the two nations. Central to that deteriorating rhetoric are the mutual accusations that have dominated headlines since last week. The US and China both continue to accuse each other of breaking the terms of the trade truce.
The path of negotiations would likely be contributing to a risk off environment were it not for one silver lining: Trump’s persuasion to negotiate. No, I’m not talking about the TACO/TAN trade again. I’m referring to the market’s belief, even surprise, of President Trump’s eagerness for a call with President Xi. From social media posts in the early hours of the morning to comments from the President’s administration, it is apparent that Trump wants this negotiation concluded. Domestic economic and political pressures mean that even the post-truce trading environment risks inviting stagflationary pressures and supply chain disruption.
So far, POTUS’ demands for a call or meeting have not been answered. That likely invites two rapidly diverging outcomes. Either the pressure that China is placing on the US by being illusive and patient during negotiations will encourage a more equitable deal between the nations. Or the President may take the silence personally and double down on an anti-China narrative. The first outcome seems significantly more likely. However, few people would be willing to actively refuse the potential for drastic action during Trump’s second term.
Discussion and Analysis by Charles Porter
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