A US Trade Deal is Looking Less Likely
Equity markets around the globe where buoyed by the re-opening of Chinese markets after the week-long Lunar New Year holiday. European markets are stronger across the board, with the Italian MIB leading the charge up 1.3% mid-day. US futures are pointing to a higher open as investors continue to absorb earnings.
US and China are Far Apart on Trade Talks
Reports suggest the US and China remain far apart in trade talks. USTR Lighthizer and Treasury Secretary Mnuchin travel to Beijing this week for another round of talks. Officials are downplaying the chances of any breakthrough. Rather, it appears that higher US tariffs may first kick in March 2 before a face-saving deal is struck. Trump announced that the tariffs would remain at 10% while the two sides negotiate.
White House the trade delegation of Treasury Steven Mnuchin will travel to Beijing for principal-level meetings that will take place from February 14 through February 15, 2019, the White House said in a statement. The top U.S. trade duo will confer with Chinese Vice Premier Liu He. The key to this week's talks is what Lighthizer and Mnuchin report back to President Trump and whether or not that will clear the way for a meeting of Trump with Chinese leader Xi Jinping. Trump said last week he would not likely meet with Xi prior to the self-imposed March 1 deadline for a trade and economic policy agreement.
Chinese Spending Contracts
Chinese spending during the Lunar New Year holiday is estimated to have grown 8.5%. If confirmed, it would be the smallest celebration since 2011. Over the past week, while Chinese markets have been closed. Chinese data continues to show and economy that is having difficulty gains traction despite government stimulus. The Trump administration believes that the weakness in the Chinese economy would give them the advantage, and while China wants a deal, they are willing to hold in for the long term. Xi has a long run plan, where Trump needs a deal so he can campaign on it. If there is no good deal, he will be hammered when he has debates.
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