Wall Street worries that President Trump may have oversold the likelihood of a China trade deal.
Markets rallied on the news, but worry crept in later in the week, when both sides reportedly had not even reached an agreement about where a signing ceremony would be held. The White House was pushing for a U.S. location, after— where Trump and Chinese leader Xi Jinping were expected to formalize a trade truce — due to protests.
Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, said Trump may have oversold the likelihood of a favorable deal to placate Wall Street, and now risks being boxed in by those earlier statements. While investors would welcome a rollback of existing tariffs, their bigger concern is about the ones still looming on the horizon. Investors already buffeted by anemic business sentiment and a contracting manufacturing sector fear that this final tranche of tariffs on a wide array of consumer goods, currently still scheduled to kick in on December 15, could strike at the heart of consumer consumption — one element keeping America’s economic momentum going in a late-stage bull market.
“Chinese officials feel they have the upper hand in this round of negotiations because the U.S. has been backing away from implementing the December tariffs ever since they were announced,” said Mark Williams, chief Asia economist at Capital Economics. “There’s still a risk that Trump pushes ahead with the December tariffs despite his advisers telling him that they would lead to higher prices for U.S. consumers, because he doesn’t want to look weak,” he said.
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