“Longer term, the hope is that tariff barriers come down,” says Washington Policy Analyst Ed Mills, “and that this is a positive to both [economies].”
Recorded February 20, 2019
“Right now, we’re getting a lot of questions about ‘Where is the U.S.-China trade fight, and can we get a resolution?’ One thing that I always remind investors is that almost all of this really comes down to the president. The president has the power to impose tariffs. The president has the power to remove tariffs. The president has the power to declare victory, or the president has the power to ultimately put more pressure on China.
What we continue to hear from negotiators is that China would like to have a meeting between President Trump and President Xi, and that they don’t want to offer up anything of true substance until the two principals are in the room. This is for two reasons. One, I don’t think they want to negotiate with themselves, and they’re very concerned that if they offer up something that is really bold and the president doesn’t accept it, it’s moved the goal post. Secondly, there’s a thought that if Trump and Xi could sit down together in a room that maybe the final outcome might not necessarily need to be as onerous as some others in the Trump administration are trying to make this out to be.
So my base case here continues to be that, as we get to some of the deadlines, we’ll get a mini deal. That we will get this meeting between President Trump and the Chinese president, President Xi. Out of that meeting, we will get some additional kind of requirements of what China has to do. We more likely than not keep the existing tariffs in place and we get a commitment from China to purchase certain U.S. goods such as soybeans, semiconductors and other agricultural products.
However, once we get to that point I remind people not to get overly optimistic, because we move to the ‘trust but verify’ stage. During this time, there will be concern that China might slow walk something and we could be one tweet away from a threat of new tariffs.
So, longer term, what I’ll tell folks is that we are going to have moments of time where we have positive headlines on trade; we’re going to have other moments of time where there’s negative headlines on trade. Longer term, the hope is that tariff barriers come down, that markets open up, and that this is a positive to both the U.S. and Chinese economy.”
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