Doing trade deals in Buenos Aires
- Chinese President Xi is due to meet with US President Trump at the G20 summit at the end of November. What can markets expect?
- The trade dispute between the US and China became more serious in September. The policy that Americans would pay a tax of first 10% and then 25% on things partially made in China was not well received by investors. Earlier trade taxes have been quite easy to evade. Companies adjusted supply chains to avoid the taxes. But as the US raises taxes on more and more things it is harder and harder to avoid those taxes. Equity markets have reacted to that.
- A reversal of the 10% trade taxes at the G20 is unlikely. The best case scenario may be a "handshake" deal that is more spin than substance. The precedent is this summer's EU-US handshake deal on trade. The US agreed not to impose more taxes. The EU made friendly noises that did not mean much.
- A handshake deal would probably stop the US from imposing a 25% trade tax on USD 200bn of goods. That would be a relief for US and global companies.
- In this trade conflict, what really matters is the ability to tweet victory.