Analysts at Nomura noted that earlier today, President Trump pulled out of the scheduled 12 June summit with North Korean leader Kim Jong Un.
Key Quotes:
“After making the announcement, President Trump said that the meeting could go ahead but only if North Korea agrees to certain conditions.”
“Recently we highlighted the potential linkages between the US-North Korea negotiations and the ongoing trade dispute between the US and China.”
“We argue that progress in the former would reduce the risks of a disruptive outcome in the latter. Based on our observations, today’s events increase the probability that US-China trade relations will evolve in a more overtly disruptive way.”
“It will be important to see how North Korea, China and the Trump administration react. A strong negative reaction from North Korea would make it difficult to reestablish positive momentum in US-North Korea relations, and that would take away one of the factors supporting a more constructive outcome in the US-China trade negotiations.”
“The bottom line is that the likelihood of material disruptions to US-China trade has gone up.”