President Trump is due to sign the U.S. China Phase One trade deal today, 15th January 2020.
The deal is clearly a positive move in the right direction and very welcome. It’s definitely injected steroids into the U.S. economy and helped stocks enjoy an end of year rally. But will it really meet market expectations – or will it be a non-event?
Only part of the solution
Stocks in Asia lost ground ahead of the deal signing after the U.S. Treasury Secretary was reported to have said U.S. tariffs on Chinese goods would remain in place for now despite the expected signing of the Phase One trade deal on Wednesday.
Red bull economy
In my opinion, it’s all become bit of a ‘red bull’ economy. A big burly charging bull hyped up on cheap money, tax incentives and low investment, now mindlessly charging down a one way street looking for it’s next ‘meal’.
It’s going to crash!
Tariffs to remain?
It has been reported the U.S. is keeping tariffs in place on Chinese goods even after the phase one trade deal is signed and investor appetite is reduced. However, this could change if Trump makes further concessions as the ‘deal’ is signed on Wednesday.
Good deal, bad deal?
The Trump Phase One trade deal just doesn’t appear to be as good as the market had hoped for. Remember, the market has been heavily influenced by trade deal talk over many months. Just look back over the effect Trumps tweets about the trade war have had on the markets.
It has been reported that China allegedly needs to buy some $200 billion of U.S. goods and services over two years to satisfy terms of the deal. Failure to comply will risk more tariffs or even the death of the deal!
Before the trade war started, it had been calculated that China bought close to $187 billion of U.S. goods and services. The $200 billion is reported to be in ‘addition’ to the 2017 trade totals.
But, this trade deal doesn’t allow for other issues to be taken into consideration, such as the alleged theft of intellectual property and the protection enforcement thereof for instance.
Still a big issue to fix!
Scupper the deal?
Trump could well use this deal as further leverage, threatening more aggressive tariffs, leaving this deal dead in the water.
The deal is due to be signed on Wednesday 15th January 2020.