We’re just a weekend removed from Friday’s partial trade deal, and China is already reneging on the agreement. President Trump said last week was just “phase one” of a two-part deal, which (hopefully) should result in a trade war de-escalation.
But now, China wants to talk again before writing everything in stone. Vice Premier Liu He is expected to meet with the U.S. one more time before the end of the month to iron out the details.
Bloomberg News – the same media outlet that first reported a partial trade deal – revealed in a new report that China also wants the U.S. to delay a December tariff hike. To Huo Jianguo, a former Chinese commerce ministry official, it’s something that the U.S. must do.
“The U.S. must concede on its December tariff threat if they want to sign a deal during the APEC summit. Otherwise it would be a humiliating treaty for China,” he said.
“The U.S. has definitely shown some good gestures, but we shouldn’t exclude the possibility of another flip-flop.”
The “flip-flopping,” investors have gotten used to. Since the trade war started over a year ago, both sides have walked-back agreements several times now.
And though the effect on the economy has been less severe than many analysts initially expected, the “will they, won’t they” negotiations have run the market ragged. Uncertainty managed to worm its way into equities once again this morning.
Even with “phase one” of a partial trade deal completed.
The S&P, Dow, and Nasdaq Composite are all “flat” on the day, remaining somewhat unchanged from Friday’s close – something that caught plenty of investors off guard after Trump declared that “we’ve come to a deal, pretty much, subject to it getting written.”
Meanwhile, the Chinese media expressed doubts about the whole affair.
“While the negotiations do appear to have produced a fundamental understanding on the key issues and the broader benefits of friendly relations, the Champagne should probably be kept on ice, at least until the two presidents put pen to paper,” read a column in Sunday’s edition of the China Daily.
“As based on its past practice, there is always the possibility that Washington may decide to cancel the deal if it thinks that doing so will better serve its interests.”
To me, that’s all valid commentary from the state-owned Chinese newspaper. Cautious optimism is the pragmatic approach here.
However, the China Daily’s editors couldn’t help themselves and had to close the article out with a heaping dose of propaganda.
As if we forgot about the kind of country we’re dealing with.
“The US should avoid backpedaling, as it has in the past, and instead cherish what has been achieved as a manifestation of a healthy and steady China-US relationship that serves the interests of both countries and the world,” said the China Daily.
So, as we progress through the week and more “trade war is over” headlines appear, remember that these days, nothing is truly as it seems. Any agreement can be broken, and if China doesn’t play by the rules, Trump is more than happy to put Xi’s feet to the fire.
After all, from Trump’s point of view, China’s on the ropes. Facing significant political pressure from the west over the Hong Kong protests, the modern Chinese Communist Party has never been in a more vulnerable state.
But until the situation grows truly dire in the Far East, the trade war will rage on. At least, until 2020, when Trump starts looking for ways to secure his re-election.