Risk aversion dominates the Asian markets following the steep decline in US overnight. Renewed concerns over US-China trade negotiations were the main driver behind the bearish moves. It’s not getting more unlikely that the phase one trade deal would be agreed in time to avert tariff escalation on December 15. That’s a big step back in expectations given that investors were hoping for some tariffs rollbacks just weeks ago.
US Commerce Secretary Wilbur Ross told CNBC yesterday that no high-level trade talks are scheduled before December 15. He said, “there’s no big meetings scheduled right now, and there certainly is no signing date scheduled.” He also noted that waiting until 2020 election to strike a trade deal would take away China’s ability to pressure the US.
“That takes off the table something that they may think gives them some leverage. Because once the election occurs… and he’s back in, now that’s no longer a distraction that can detract from our negotiating position,” Ross said. He also emphasized that “the president’s objective always has been to get the right deal independently of when or anything else like that. So his objectives haven’t changed. And if we don’t have a deal, he’s perfectly happy to continue with the tariffs as we have.”
His comment came just after President Trump said that “I have no deadline, no,” regarding the trade agreement phase one. “In some ways, I like the idea of waiting until after the election for the China deal. But they want to make a deal now, and we’ll see whether or not the deal’s going to be right; it’s got to be right.”
Politically, tensions between US and China will also likely intensify after House of Representatives on Tuesday overwhelmingly pass a bill to toughen the response to China’s crackdown on Uyghurs in Xijiang. The Uighur Act of 2019, passed by 407-1, was step up to the Senate version passed back in September. The bill requires the President to condemn abuses against Muslims and call for the closure of mass detention camps in the northwestern region of Xinjiang. It also calls for sanctions against senior Chinese officials who it says are responsible. Just last week, Trump signed the Hong Kong Human Rights and Democracy Act into law. Both drew fierce objections from China.
