U.S. Reaches In-Principle China Deal, Awaits Trump Signoff
Comment of the Day

December 12 2019

Commentary by Eoin Treacy

U.S. Reaches In-Principle China Deal, Awaits Trump Signoff

This article by  Jenny Leonard, Shawn Donnan and Saleha Mohsin for Bloomberg may be of interest to subscribers. Here is a section:

U.S. negotiators have reached the terms of a phase-one trade deal with China that now awaits President Donald Trump’s approval, according to people briefed on the plans.

Trade advisers were set to meet with the president at 2:30 p.m. to discuss the agreement. An announcement could come by day’s end, the people said. A White House spokesperson declined to comment.

The terms have been agreed but the legal text has not yet been finalized, according to the people. The administration has reached out to allies on Capitol Hill and in the business community to issue statements of support once the announcement is made, they said.

U.S. stocks rose and Treasury yields spiked on the news. Earlier Thursday, Trump tweeted that the U.S. and China are “VERY close” to signing a “BIG” trade deal, also sending equities higher.

“They want it, and so do we!” he tweeted five minutes after equity markets opened in New York, sending stocks to new records.

Eoin Treacy's view

Nothing seems to animate traders more than trade related tweets at present. Every negative sentiment is greeted with a couple of percent sell-off and every positive utterance is greeted with a bounce. The broad picture is the Chinese economy is slowing and the administration has been priming the populace for harder times ahead. Meanwhile the US economy is strong, but business confidence is weak. The Chinese and US businesses have a clear interest in a deal that removes barriers to trade but the Trump administration also wants to get to 2020 election without a recession. That puts the odds of a deal closer to fruition that any other argument.

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