Hope for US-China trade progress sends stocks jumping

Lester Mason
May 22, 2018

President Trump said Monday that his hard-nosed trade negotiations won some concessions from China and not the trade war his critics had predicted, scoring what he crowed was another victory for his "American First" agenda. "There is no question the United States did not move as proactively as it should have during the 2000s with China's exports to the US were rising dramatically".

Asian stocks gained Monday and US equity futures jumped on the news that the trade war is on hold for now.

The U.S. and China declared a truce in their trade dispute over the weekend, but that will prove temporary if the world's two largest economies fail to deliver on their vague commitments to re-balance trade. -China trade war easing and elevated U.S. Treasury yields, analysts said.

Treasury Secretary Steven Mnuchin's declaration that the American tariffs would be suspended contributed to a sense of relief in global markets that the two countries had stepped back from the brink.

Explainer: What is a Trade War? The yield on the 10-year Treasury note stayed at 3.06 percent.

Oil prices held firm near 3 1/2-year highs after Venezuelan leader Nicolas Maduro appeared to be set for re-election, an outcome that could trigger additional sanctions from the United States and more censure from the European Union and Latin America.

He anxious that the China hawks, U.S. Trade Representative Robert Lighthizer and Trade Policy Director Peter Navarro, would undo progress forged by Mr. Mnuchin. The administration says China has agreed to a framework of a deal that includes increased sales of USA farm products to China by 35 to 40 percent.

"This is an indication of what we'll see near term, because we are through earnings, relatively light on macro data, and with geopolitics, it seems like some of the emotion has been reduced between now and the Korean summit", according to Charlop.

"Even with a drastic reallocation of Chinese imports of energy, raw materials and airplanes in favor of the US, the bilateral trade deficit may reduce by $100 billion", said Shih.

The U.S. fined ZTE $1.2 billion previous year for violating American bans on trade with Iran and North Korea. "Real structural change is necessary".

Last month, the administration proposed tariffs on $50 billion of Chinese imports to protest the forced technology transfers. "The US will have the opportunity to reduce its trade deficit with China, while China will achieve the consistent purchase of US goods to benefit the development of the country and its people's life", it added. Mnuchin also forecast a doubling in sales of USA energy products to the Chinese market, increasing energy exports by $50 billion to $60 billion in the next three years to five years. Trump later ordered Lighthizer to seek up to an additional $100 billion in Chinese goods to tax.

US Steel Corporation is down 5.84% on the year. Texas LNG is not considering developing an import terminal in China, he said, which would likely be needed to expand USA exports. The U.S. has long accused Beijing of secretly stealing U.S. technology from American businesses.

Yet Beijing may not be willing to bargain away its drive to become a technological power in such areas as robotics and artificial intelligence, embodied in its "Made in China 2025" initiative. That project calls for China to develop world-class competitors in fields from information technology to electric cars to pharmaceuticals. China is increasing its gas usage per government mandate for the cleaner burning fuel to make up at least 10 percent of its energy mix by 2020 to offset record air pollution levels, with further earmarks by 2030. The Chinese have just agreed in general terms to purchase a bit more USA stuff", said Mr. Alden, author of the book "Failure to Adjust: "How Americans Got Left Behind in the Global Economy".

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