Search ForexCrunch

Neil Shearing, group chief economist at Capital Economics, suggests that as we are moving towards an agreement between the US and China on trade, the finer points of the deal are still unclear.

Key Quotes

“It is likely to involve Beijing agreeing to increase its imports from the US in several areas (soy, oil, natural gas, wheat, corn etc.) in exchange for Washington removing the threat of a further increase in tariffs on Chinese goods and possibly rolling back those that have already been imposed over the past year. As things stand, it’s unclear whether some of the more thorny issues like enforced technology transfer will be tackled to any significant extent.”

“The fact that a full-blown trade war between the world’s two largest economies appears to have been averted is clearly a good thing. But the abrupt ending of talks between President Trump and Kim Jun Un last week serves as a timely reminder that enthusiastic briefing ahead of summits doesn’t necessarily translate into policy action. More fundamentally, even if a deal between the US and China on trade is ultimately agreed we don’t expect that a trade truce will now provide a substantial shot in the arm to the global economy.”

“We doubt that a US-China agreement will have much impact on financial markets either. Growing optimism about a trade truce appears to have been a significant factor behind the rebound in equity markets since the start of this year. We suspect that a deal is now priced in to most asset markets.”