Last month, it looked like phase one of a US-China trade agreement was a done deal. In fact, reports suggested the two countries were finalizing where Donald Trump and Chinese president Xi Jinping would sign on the dotted line. Hopes were running high. However, several obstacles have appeared.
Tariffs may not be waived under phase one of China trade deal
China wanted existing tariffs to be waived as part of the trade deal. However, last week, Trump spooked markets by saying that he hadn’t yet determined whether the tariffs would be lifted. Both the Hang Seng and Shanghai Composite fell after the news. Protests in Hong Kong have also pressured the Hang Seng.
The Wall Street Journal reports China and the US may not be on the same page regarding farm purchases. China has a massive trade surplus with the US, and agricultural products and energy exports are two ways through which the US can bridge the trade gap. Although the Trump administration is pushing for hard numbers in the trade talks, it has only received vague promises from China to purchase more US farm goods.
US-China trade deal: It’s not done until it’s done
Earlier this year, a US-China trade deal looked almost on track. However, in May, Trump sparked further conflict by accusing China of reneging on commitments.
Fast forward to a week ago, and Trump and Xi Jinping were reportedly planning to sign phase one of a US-China trade deal in Iowa. And now both sides are still debating the deal’s basic structure. Simply put, we won’t be certain about anything until the US-China trade agreement is a done deal.
The Dow Jones and Shanghai Composite
Optimism about phase one of the US-China trade deal lifted the Dow Jones and Shanghai Composite. However, with trade deal optimism fading again and protests in Hong Kong, the Shanghai Composite has come under pressure this week. Dow Jones futures appear to be heading for a weak opening today.
Meanwhile, the Dow Jones has surged to a record high, giving Trump plenty to tweet about. As the earnings season wraps up, markets may depend more on Trump news. For more insights, read Dow Jones & S&P 500 ‘Future’ Lies at Trump’s Desk.