While markets come under pressure, the Dow falling over 600 points today, the US and Chinese negotiators are adjust schedules in both Washington DC and Beijing. Now we do not know what is going on behind the scenes but we do know that there is a game of chess and a waiting game being played by both sides. Here are the facts.
1. China seems ready to push a trade deal thought – Vice Primer Liu He has said he wants to bring 100 delegates to Washington DC for the final meetings – this large delegation would imply a conclusion as big groups always attend final meetings.
2. US Treasury Secretary Steven Mnuchin told the New York Times last month that negotiations were “in the final laps.” And he has spent time flying back to Beijing with Trade Representative (this guy is a proven winner), Robert Lighthizer. However, Mr Lighthizer has said more recently, in the past 12 hours, that on Friday of this week, look for more tariffs – Trump suggested $325 billion of goods are marked for 25% tariffs.
3. Some people are saying that the Trump team is preparing the market for a deal or no deal outcome that, in the world of Donald Trump, is a reality we must come to grips with. If Trump does follow through and there is an increase in tariffs, it will have a 45 bp impact on global growth and 1.2% to 1.5% negative impact on China growth.
This trade war, if escalated, could have negative impact on the global economy, with both the US and China suffering some of the pain from a shock to the trade system.
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