Trade Deal Doubts 🙊

by 28 Mar, 2019

Trade Deal Doubts

Negotiators are back at it again in China this week, trying to hash out a trade deal that addresses the historic US-China trade deficit. Analysts, however, are becoming skeptical that what may emerge will be a watered-down version of what was promised. Yikes, what’s the story here?

Former chairman of Morgan Stanley, Stephen Roche, highlighted the fact that the US currently runs a trade deficit with over 100 countries, making addressing the deficit with China relatively meaningless. To that effect he said, “Don’t kid yourself. We cant fix a multilateral problem by bilateral tariffs, yet we tried to do that.” 

He also said that by diverting away from the real issues, such as non-tariff barriers, IP theft and forced technology handovers, we end up with a deal that’s not worth making. While this is a very strong opinion, it does hold some merit. 

The trade deficit is a multilateral issue, with no quick fix. Nevertheless, with China making a few tangible steps towards cooperation through significant soybean and natural gas purchases, we may see some form of deal emerging in the not too distant future. 

Even though the deal may not have the fundamental economic impact Roche is after, it will represent a symbolic easing of volatility and undoubtedly boost investor confidence in global equity markets. 

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