In an interview with CNBC today, Commerce Secretary Wilbur Ross sought to tone down expectations from the proposed meeting between US President Donald Trump and Chinese President Xi Jinping at the G20 Summit. Ross said that the G20 is not “where you’re going to negotiate a 2,500-page agreement.” He added, “there may be an agreement on the path forward, but that’s about as far as we can expect it to go.”
In Forget Buenos Aires—Here’s Why Osaka Might Look More Like Hanoi, we noted that investors should not expect much from the meeting. With less than two weeks to go before the summit, China has still not confirmed whether President Xi Jinping will meet with Trump. Furthermore, comments from Chinese officials make a trade deal seem out of sight currently, especially given US demands on enforcement mechanisms. According to Ross, “enforcement would be the most important element of any potential deal” between the United States and China.
Life with tariffs
Meanwhile, companies also seem to be finding ways to live with a prolonged trade war. Nintendo is reportedly planning to move some production from China to Southeast Asia. Apple (AAPL) supplier Foxconn might also consider moving Apple’s assembly out of China if President Trump goes ahead with tariffs on the remaining Chinese goods. Meanwhile, Chinese markets have underperformed global markets this year amid the escalation in the trade war. The iShares China Large-Cap ETF (FXI) has gained 4.7% this year as compared to the 16.3% gains in the SPDR S&P 500 ETF (SPY). FXI underperformed SPY last year as well. Trump’s tariffs also seem to be taking a toll on the Chinese economy. Read China Might Not Admit It, but Trump’s Tariffs Really Sting for more analysis.