The Trump Backtrack – Was that a Good or a Bad Move?

Trump extends China an olive branch in a bid to support retailers over the Christmas period. China needs to ramp up agri imports to ease tensions further.
Bob Mason
Arms trade business concept.

The Backtrack

On Tuesday afternoon, the U.S administration announced that it would delay tariffs on certain goods from China until 15th December.

Interestingly, the U.S administration cited health, safety, and national security as the reason behind the delay.

Goods included in the list were apparel, including some footwear, and electronic items such as mobile phones, laptops, and video game consoles.

The announcement led to a rebound in the European equity markets and a sharp bounce back in the U.S equity markets, led by the NASDAQ.

It was a surprise move by the U.S administration. Just a week ago U.S President Trump stated that the U.S was not prepared to draw out a trade agreement with China.

Perhaps China’s retaliatory measures contributed to the softer stance. Beijing targeted the U.S administration’s lifeline, the agricultural sector, while also showing a willingness to let the Yuan slide.

Economic Woes

With the U.S economy showing signs of running out of steam, Trump’s concerns ahead of the Christmas season were justified. The U.S President stated that the delay on tariffs was in a bid to avoid disruption over the Christmas period.

The last thing that the U.S administration needs is a slide in retail sales over the holiday season…

While the global financial markets received the olive branch warmly, how China responds will be key.

Simply delaying tariffs until December in the interest of economic prosperity may not be the enticement China needs to start ramping up agricultural product imports from the U.S.

There were no details of what was discussed ahead of the announcement…

What Lies Ahead

While crude oil prices, the Dollar and the global equity markets rebounded, the trade war is far from over.

The latest move by the U.S falls well short of China’s demands made in the run-up to Tuesday’s announcement.

Huawei and existing punitive tariffs have already tarnished relations between the world’s 2 largest economies.

If China does agree to ramp up the import of agricultural goods from the U.S, however, it should raise the prospects of constructive talks next month. It’s a big if, however. Existing tariffs have hit the Chinese and global economies and the pain is unlikely to abate anytime soon.

Whatever happens, Trump will look to play off the latest move. Easing trade tensions places the onus on China to respond in kind.

If China fails to deliver… The U.S administration may look to justify hurting the domestic economy further in a bid to force China into submission.

Interestingly, Beijing may have time on its side. The USTR announcement may not have cited Christmas as a consideration, but Trump’s comments did and mean that there’s unlikely to be a change in its position.

It would mean, however, that the U.S administration may crank it up after the festive season should Beijing stand pat…

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US