Piet P.H. Christiansen, senior analyst at Danske Bank, suggests that it appears that things have calmed down a bit on the surface between the US and China on the trade war with no new issues to fuel the fire yesterday.
Key Quotes
“Trump tweeted yesterday: “When the time is right we will make a deal with China”. After adding that this must be a great deal for the US, he says: “It will happen, and much faster than people think!”. It still seems every time stock markets are down, he starts tweeting about a deal coming. However, the nationalistic sentiment is growing on both sides and that could make it even harder to get a deal done.”
“One of the key challenges regards China’s willingness to change its laws, which is apparently a red line for China. But also one of the key requirements from the US. Will Trump be willing to sacrifice this demand? The next thing to look out for is whether a new round of talks is announced at some point or a potential phone call between Xi and Trump. Both might dampen the fears for a while. However, new talks are no guarantee of a deal and we see it as increasingly likely that it will take more financial stress for the two sides to feel enough pressure to find a compromise. This could easily drag into H2.”
“Adding to the risk factors, note also that by Saturday, 18 May, Trump has to decide on the potential of tariffs on European vehicles. While we do not expect Trump to go ahead with the tariffs, we should keep an eye on a potential new risk factors for the European/global economy. Should he go ahead, the tariffs must either be implemented within 15 days or he can delay implementation by 180 days if negotiations with the EU start (the latter may be more likely).”
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