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Treasury Secretary Mnuchin indicated over the weekend that the proposed $150bn US tariffs on Chinese imports would be postponed while trade negotiations continue, points out the research team at Nomura.

Key Quotes

“His comments followed a two-day round of talks between US and Chinese officials and lowered the likelihood of an initial round of tariffs being imposed, helping to partially defuse US-China tensions over the near term.”

“Separately, Mnuchin said yesterday that President Trump would be willing to accept a “skinny” NAFTA 2.0, i.e., an agreement that did not require Congressional approval if the current negotiations do not go as planned. A more limited NAFTA 2.0 would need to involve only changes to the current agreement that can be enacted by presidential proclamation and do not affect federal statutory law. Historically, changing rules of origin or certain tariff rates has been done by the executive branch without Congressional approval. However, relying on executive branch authority alone would likely significantly reduce the scope of any “skinny” NAFTA agreement changes.”