The tariffs are off! China’s ready to make a deal! The market is saved!
Best of all? Wall Street was proven right once again, just days after they tried to talk investors down from the ledge.
All because of a tweet from President Trump earlier this morning, which read:
“China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers…great for U.S., not good for China!”
And sure enough, the market altered course as soon as it opened. Pre-market trading made an abrupt about-face, and analysts were chomping at the bit to provide soundbites detailing a new, rosier outlook on the trade war.
With China ready to “make a deal”, why wouldn’t investors be happy? The S&P 500 and Dow both rose roughly 0.4% just a few hours into today’s trading session, on the news that a Chinese ceasefire was on the table – confirmed by a pre-market Trump tweet.
And while believing the President’s message this morning may be convenient, the truth is that we have zero evidence that the US has gotten any closer to reaching an agreement with China.
In fact, it’s looking like we’re actually headed in the opposite direction, and that Trump’s tweet was simply a distraction to keep the market afloat after a ruinous Tuesday trading session.
Why, you may ask?
Because just an hour-and-a-half after Trump tweeted about China’s willingness to settle, the U.S. released the following statement via a Federal Register notice:
“In the most recent negotiations, China has chosen to retreat from specific commitments agreed to in earlier rounds. In light of the lack of progress in discussions with China, the President has directed the Trade Representative to increase the rate of additional duty to 25 percent.”
What’s important to note is that since Trump’s tweets from Sunday, Monday, and Tuesday, nothing has officially changed.
China’s Vice Premier Liu He will still come to the U.S. as initially planned, and he’ll be there to convince the Trump administration that China has conceded enough in negotiations to delay the Friday tariff hike.
And, as mentioned in Trump’s Sunday tweets, the U.S. has now formally drafted the tariff increase of 25% (as planned) for top trade representative Robert Lighthizer to use in the upcoming meetings – a “loaded gun” that the White House hopes will tilt negotiations in their favor.
The only variable that’s actually changed since Sunday is Trump’s latest tweet, which alleges that Vice Premier Liu He is coming to Washington to “make a deal”. Even if the Vice Premier actually told him this, the Chinese aren’t exactly known for their honesty.
Moreover, President Trump has a history of embellishing things in order to get results. We’ve seen it before, and based on what’s happened recently, it looks like he could be doing it again to prevent another market meltdown.
Virtually every member of the mainstream financial media has ignored the facts as they stand, and instead are practically declaring a trade war victory – all while the U.S. readies its tariff arsenal for an economic Armageddon.
Remember, the Chinese just reneged on their previous commitments, and what the U.S. is asking them to do now – alter Chinese law to prevent intellectual property theft – might be a “bridge too far”.
Even with a 25% tariff hanging overhead.