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US-Sino Trade Talks Continue

US-Sino Trade Talks Continue

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Monday, 11 February 2019 08:37 AM Current | Bio | Archive

The attempt to stave off more trade tariffs or trade taxes continues this week with what has built as ‘high level’ talks in Beijing. ‘High level’ does not mean the talks include President Trump and as trade tariffs or trade taxes are the personal prerogative of the President, this might be considered a bit of a hindrance.

Instead, the U.S. is represented by Trade Representative Lighthizer and Treasury Secretary Mnuchin. These might be supposed on opposing sides when it comes to doing a deal. We’ll see.

Financial markets would much prefer if trade was not ‘taxed’, not least because of trade tariffs effectively are a tax on equities. Therefore hints, body language and facial tics from the discussions will all be overanalyzed, the South China Morning Post reports.

Another Partial Government Shutdown?

The other U.S. political issue with the potential to upset financial markets is the possibility of yet another U.S. government partial shutdown.

Talks in Congress to avert this seem to have stalled with mention of a 50/50 chance of a deal.

Financial markets had rather supposed that politicians would going to have a ‘grownup’ discussion and come to a sensible conclusion, which perhaps shows that investors are inclined to let optimism triumph over experience.

The deadline for a deal is this Friday, February 15. Failure to agree on this would raise financial markets’ concerns about the future ‘debt ceiling’ debate and the September budget, the BBC reports.

China’s Growth Rate

As China returns from the ‘lunar new-year’ holidays, a Chinese state owned newspaper suggests today that the current quarter could see 6 percent economic growth.

The Financial Times reports that the ‘Economic Information Daily’, a newspaper run by China’s official Xinhua news agency reports on its front page today that China’s economic growth could slow to the weakest level on record to 6 percent this quarter: “It is not difficult to determine that this year our country’s economy will continue to bear pressure, with a conservative estimate for full-year cumulative growth of about 6.3 per cent and the possibility that growth for the present quarter could reach 6 per cent.”

Now, if that were to be the case that would push China’s growth rate in the final quarter of 2018 to 6.4 percent, down from the reported 6.6 percent, which is not necessarily a shock.

Growth in China does need to slow down somewhat over time with a declining population and productivity also likely to slow.

Anyway, many economists see China’s long-term trend rate of growth closer to 5 percent than to 6 percent.

The UK Economy while Brexit Talks Go On

From the United Kingdom we got today the latest GDP and trade data.

First; the UK economy surprisingly contracted at the end of 2018 by a 0.4 percent ‘monthly’ fall in total output, which was the worst performance since March 2016 and, following an unrevised 0.2 percent advance in November, put GDP quarterly growth at just 0.2 percent, which is less than half the 0.6 percent GDP growth rate that was achieved in July-September. Compared with a year ago, GDP was up 1.0 percent, which is down from a 1.5 percent annual growth rate in the previous period.

Private consumption and government consumption were the main drivers of growth, while gross capital formation and net trade contributed negatively.

Second; the deficit on global goods trade weighed came in at £12.10 billion (USD $15.6 billion) in December. This was much as expected and slightly smaller than November's larger revised £12.40 billion (USD $16 billion). The deficit with the rest of the EU was £8.46 billion (USD $10.9 billion), up from £8.22 billion (USD $10.6 billion) last time, and with the rest of the world £3.64 billion (USD $4.7 billion) after £4.18 billion (USD $5.4 billion).

Overall export volumes were down 1.8 percent on the month and were 0.9 percent lower over the quarter.

The weakness of the British pound or Sterling no longer seems to be providing much help to the UK's external accounts. The GDP numbers caused Sterling to ease somewhat

The interminable EU-UK divorce process rather overshadows the data. The UK economy surprisingly contracted relatively slightly in the fourth quarter. The UK consumer has proven relatively resilient in the face of the ongoing Brexit political nonsense.

However, companies have been reluctant to invest until there is greater clarity about the political outcomes.

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

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The attempt to stave off more trade tariffs or trade taxes continues this week with what has built as ‘high level’ talks in Beijing.
us, sino, trade, china, talks
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2019-37-11
Monday, 11 February 2019 08:37 AM
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