Danske Bank analysts’ point out that yesterday, Trump continued his series of hawkish trade tweets, as he said the US is losing USD500bn on trade with China, adding “we’re not going to be doing that any more”.
Key Quotes
“Market sentiment rebounded slightly yesterday as hopes of an imminent trade deal were revived after China confirmed that trade talks would move on this week despite the US raising tariffs. The US Trade Representative told reporters that China’s top negotiator Liu He was still coming to Washington for trade talks starting Thursday (instead of Wednesday) and confirmed that tariffs would go rise on Friday 12:01am.”
“US Treasury Secretary Steven Mnuchin said the tariffs would be reconsidered if the trade talks get back on track. Markets (and we) initially feared that the tariff increase would derail the trade talks and China would stay away this week. According to Lighthizer, the US team saw an erosion of commitments from China that led to the decision to increase tariffs. According to Mnuchin, the Chinese wanted to renegotiate elements that had already been finalised and the US is not prepared to do that.”
“Apparently, China is not willing to change its laws as part of a deal, but to some extent that probably reflects that China has already implemented some of the things the US wants. The new foreign investment law, among other things, bans technology transfer, raises IPR protection and declares that Chinese and foreign firms should be treated equally.”
“It is still up in the air how the road to a trade deal will be. But we believe a deal will be reached by the end of Q2. The last bits left in the trade talks are also the most difficult. But one way or the other, we expect the two sides to find a solution, as the alternative of no deal would be very unattractive for countries.”
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