Trade is good (for now)

Posted by: Paul Donovan

05 Jun 2020

Daily update

  • US Trade Representative Lighthizer is feeling good about the phase one trade deal with China. China bought some US soybeans this week, apparently. This is likely to be the pattern on trade for now. Both China and the US are using dramatic language on trade, but the reality is that both sides do not want to threaten the trade deal at the moment.
  • The period of maximum risk for trade is probably around August or September. US President Trump could then appear tough by imposing trade taxes. However, the economic damage of those trade taxes to US companies or consumers will take some months to hit, so the cost would come after the November presidential election.
  • The interminably tedious UK-EU divorce concludes another phase with no progress – talks are to end today with nothing being agreed. This is not unexpected. In the EU, deals are normally only ever done by sleep-deprived heads of government at 4am.
  • The US employment report is not really that interesting. US unemployment is a survey, and initial/continuing jobless claims offer better signals of the labor market. The consensus range on unemployment is 16% to 22.5%, making the idea of "consensus" pretty meaningless.

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