US President Donald Trump wants to raise tariffs on US$200bil worth of Chinese goods to 25% from 10%.
KUALA LUMPUR: The US-China trade deal talks are still in sight despite the latest threat by US President Donald Trump to raise tariffs on US$200bil worth of Chinese goods to 25% from 10%.
SPI Asset Management managing partner Stephen Innes said on Tuesday a “trade deal” was and still is the market baseline, but he thinks “we are all utterly amazed by the latest proceedings”.
Innes said while the markets sell-off was a bit overkill knowing that the likelihood for the deal to fall apart was minuscule.
“I'm convinced that it is in both parties best interest to deescalate tensions and it would not surprise me one bit if the word doesn't come out over the next 24-48 hours that both (US President Donald) Trump and (Chinese president) Xi Jinping have spoken and that after a slight hic-up the talks are back on track,” he said.
Commenting on Wall Street’s overnight performance, he said US equity markets rebounded into the bell reversing a most vicious equity market meltdown after Trump fanned the trade war flames.
“But we are not out of the woods just yet as the third instalment of US tariffs currently at 10% on US$200bil of imports will rise to 25% on Friday unless President Trump relents. But with the US trade hawks fuming after China tried to alter the deal at the final turn, this too seems very unlikely at this stage.
“Mind you I am still not any clearer as to what triggered the sudden shift in the US trade position, but earlier in the day investors heaved a sigh of relief when news broke that the Chinese delegation will still attend talks this week. Let us see if this news still sticks,” he said.
Innes said if China stays at the table this supports the markets base case scenario however from the US position most if not all the existing tariffs will stay in place to ensure China compliance before gradually being reduced over time.
“I still think bridging this trust gap is the great impasse,” he said.
Innes said frankly going into the 2020 elections with growing evidence the US consumer is wearing the brunt of these tariffs the US administration could backpedal, but they most certainly will not impose tariffs on the remaining US$325bil of imports from China given the dire consequences on US GDP.
“Indeed, this will would supply horrible optics going into what should be an emotionally charged knock em down drag em out election campaign,” he said.
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