Trump pushes for China trade deal with market gains in mind

US President Donald Trump/Bloomberg

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The world’s two largest economies are moving closer to a final agreement that could end their almost year-long trade war.

Wednesday 06, March 2019

(Bloomberg) --President Donald Trump is pressuring US trade negotiators to cut a deal with China soon in hope of fueling a market rally, as he grows increasingly concerned that the lack of an agreement could drag down stocks, according to people familiar with the matter.

As trade talks with China advance, Trump has noticed the market gains that followed each sign of progress, said the people, who requested anonymity to discuss internal deliberations. He watched US and Asian stocks rise on his decision to delay an increase in tariffs on Chinese goods scheduled for 1 March.

A new trade accord that would provide Trump with a much-needed win after the collapse of his summit with North Korean leader Kim Jong Un.

Trump, who met with his trade team and expressed interest in hosting Chinese President Xi Jinping for a signing ceremony on a deal as soon as this month. His enthusiasm for a deal could shape crucial decisions such as balancing Chinese pressure to lift tariffs immediately against trade hawks’ arguments to initially maintain duties as leverage to assure good behaviour by Beijing.

Trump’s fixation on stock-market performance has shaped his assessments of his economic policies.

Trump’s economic team has told him an agreement will unleash a market rally, the people said. Advocates of a compromise with China have also told Trump it is crucial to cut a deal soon to reap the full boost ahead of the election because benefits such as more Chinese purchases of US soybeans and other products will have a delayed impact and take time to reverberate through the economy, they said.

Some investors say a deal isn’t likely to have a major impact because it’s already mostly priced into the market as a result of the recent positive signals from the administration. On the other hand, failure risks roiling stocks.

“The risk could be more to the downside, but on the other hand this would take away some certainty and that is good for companies looking to invest,” said Sebastien Page, head of global multi-asset strategy at T. Rowe Price in Baltimore. “If we get a meaningful trade deal, there is some upside scenarios for emerging market stocks.”

Inside the White House, key economic advisers including Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow are eager for a quick resolution to the trade conflict, while trade hawks such as US Trade Representative Robert Lighthizer has taken a tougher line with China.

Trump is facing pressure from both parties in Congress, with Senate Democratic Leader Chuck Schumer in a floor speech on Tuesday cautioning the president not to settle for a weak deal with China.


TAGS : China-US trade war, US President Donald Trump, Chinese President Xi Jinping

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