A Gentlemen’s Trade Agreement
President Trump and President Xi have been worlds apart on trade for the best part of two years, but now they finally seem to have broken the deadlock. The S&P 500 hit record highs yesterday as an implied tariff truce was signed, but this won’t be the end of the story!
China’s shopping cart just got 200-billion-dollars heavier, with countless American items promised for purchase in a “phase-one” agreement. Everything from hair clippers to cloud computing services is on the list, one of the first aimed at knocking trade barriers down rather than building them up. The White House has promised that once further negotiations make it over the line so that long-term trade is “fairer,” actual import duties on Chinese goods can be abolished.
Also, in favor of the States, American technology will now be more protected from theft and forced transfer to Chinese companies. The Chinese Communist Party (CCP) has been accused of the proverbial “deal with the devil” before, looking to pinch American intellectual property (IP). That will be no more, apparently!
But some fear that in practice, this is nothing more than a handshake deal. China has room to rebel with President Trump cornered by his own re-election campaign. Enforcing trade deals is just as hard as making them, and tariff hikes on the campaign trail risk a market sell-off at the worst possible time.
Oh, what the Chinese envoy would give to know if President Trump is getting a second term! If China risks shirking this one-sided deal until November, it could horribly backfire and turn into a long next four years if Trump’s second term is confirmed. However, holding back could save the world’s second-largest economy billions. Decisions, decisions!