Tags: trump | china | trade | deal | economic | victory

Trump to Tout Any China Trade Deal as Economic Victory

Trump to Tout Any China Trade Deal as Economic Victory
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Monday, 29 April 2019 12:32 PM Current | Bio | Archive

U.S.-China trade talks continue this week. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing tomorrow to continue the U.S.-China trade negotiations.

Next week, Chinese Vice Premier Liu He will be in Washington for more discussions.

It looks to me like there is something like a hint of “Brexit” about these negotiations which do seem to be dragging on and on.

Fact is that intellectual property and forced technology transfer are still on the table while U.S. officials say privately that an enforcement mechanism for a deal and timelines for lifting tariffs remain sticking points.

Tim Stratford, chairman of the American Chamber of Commerce in China (AmCham) and who has worked in China for more than three decades commented “An effective enforcement mechanism will define the deal,” Reuters reported

In the meantime, President Donald Trump is probably more willing to concede to get some kind of deal and to reverse in some way or another the trade tariffs.

The president seems to be emphasizing the economy in U.S. election-style rallies.

As the “uncertainty” around the U.S.-China trade negotiations has done damage to investing and manufacturing and as the trade tariffs themselves represent a tax on equity markets, focusing on the economy in the election would seem to imply that some kind of trade deal should be done sooner rather than later. That trade deal could then be spun as an economic victory, regardless whether or not that’s true.

Besides that, the U.S. Bureau of Economic Analysis (BEA) just released its Personal Income and Outlays data for the month of March that point to consumer momentum, but weakness for inflation

For investors it’s important to take note that BEA states “Due to the recent partial federal government shutdown, this report combines estimates for February and March 2019."

U.S. personal income increased 0.1 percent month-over-month in March, following a 0.2 percent rise in February and missing market expectations of a 0.4 percent gain. Wages and salaries, the largest component of personal income, increased 0.4 percent in March after gaining 0.3 percent in February.

Personal spending rose 0.9 percent in March, beating market expectations of 0.7 percent and following a 0.1 percent gain in February. That was the biggest increase in personal spending since August 2009 U.S. personal income and personal spending along with the personal consumer expenditure deflator, which is monitored by the Federal Reserve as a signal of inflation pressures, were released.

The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

The PCE index does matter for the Federal Reserve although there is no significant inflation pressures in today’s data.

Higher wages have been chipping away profits in the wider U.S. economy rather than generate price changes.

Over in Europe, the governing Spanish Socialist Workers' Party (PSOE) has won the Spain's general election, according to reports.

The result was more notable for what did not happen than for what did happen. Prime Minister Pedro Sanchez seems likely to return to power, securing an increase in the number of seats but no majority.

However, the anti-establishment “Vox” Party did not perform as well as was expected by opinion polls, though it did gain parliamentary representation.

Investors have tended to focus on the rise of anti-establishment political groups as a key risk for Europe and the Euro area in particular. That may still be a risk around the European Parliamentary elections that take place from May 23 to May 26, as some voters do not necessarily regard the European Parliament as a serious institution, but the story of Europe facing a continuous rise of anti-party politics is for now at least questioned by the weekend’s results in Spain. 

Besides that, the flow of bad news for the Euro area continuous.

The economic sentiment indicator for the Euro Area fell for a 16th consecutive month to 104 in April 2019 from a revised 105.6 in the previous month and below market expectations of 105. It was the lowest reading since September 2016 mainly due to a steep deterioration in industry sentiment (-4.1 vs. -1.6 in March).

In addition, morale worsened among consumers (-7.9 vs. -7.2), retailers (-1.1 vs. 0.3) and constructors (6.7 vs. 7.5), while confidence among service providers was unchanged (at 11.5).

All this is important for investors as the whole situation remains negative for the euro with no better times in sight and positive for the dollar index DXY.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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HansParisis
President Donald Trump is probably more willing to concede to get some kind of deal and to reverse in some way or another the trade tariffs. That trade deal could then be spun as an economic victory, regardless whether or not that’s true.
trump, china, trade, deal, economic, victory
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2019-32-29
Monday, 29 April 2019 12:32 PM
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