Hedge fund icon Ray Dalio delivered a grim speech yesterday at a gala dinner for the National Committee on US-China Relations. The investor is worried about war in all it forms. He said that “There is a trade war, there is a technology war, there is a geopolitical war, and there could be a capital war”. Famed former US Secretary of State Henry Kissinger also spoke at the event and told both sides that they must avoid a shooting war at all costs, as no side can win.
FINSUM: Everyone on both sides will hopefully be somewhat relieved if a “phase one” trade deal can be reached.
Trump went on the record yesterday telling investors that the US and China were close to finalizing a trade deal. Markets were unconvinced. Speaking at the Economic Club of New York yesterday, Trump said “We’re close to a significant phase-one trade deal with China … It could happen soon, but we will only accept a deal if it’s good for the U.S. and our workers and our companies”. Markets held ground after the comments, but ultimately fell back as Trump offered little evidence to back up the comments of a deal being “close”.
FINSUM: In our view of this situation, a deal is never close to being done, it is perpetually on the edge of falling apart and only truly done when it is signed.
Hong Kong police have warned that the city is on the brink of collapse. A police shooting of a protester on Monday has sparked a huge wave of renewed protests that have blocked roadways and caused chaos. “Over the past two days, our society has been pushed to the brink of a total breakdown as rioters went on a rampage”. The protests have turned increasingly violent in recent days as 128 were hospitalized with injuries on Monday.
FINSUM: This has no end in sight, and with tension increasing, so too are the odds that it somehow becomes wrapped up in the US-China trade war.
In what comes as a very encouraging sign in the trade war, Washington is considering dropping some tariffs on Beijing as part of an effort to close a deal with China. The Trump administration is reportedly debating whether to drop $112 bn worth of tariffs. That said, the White House would be expecting something in return. The potential cut in tariffs follows the cancellation of a new $250 bn+ tariff package.
FINSUM: Both sides making concessions is the key to a solid deal. We find this encouraging.
Investors have been jolly lately about the progress made in the trade war. Ever since Trump’s announcement of a “phase 1” deal a few weeks ago, trade war concern has been diminishing, with markets rising accordingly. However, there was a reality check today as China made worrying comments, saying that they don’t think any long-term/substantial deal would be possible with Trump, and that they are even worried about him backing out of a simple short-term deal because of his “impulsive nature” (from Bloomberg).
FINSUM: Talk about throwing cold water on something. That said, none of these comments—positive or negative—mean too much. What ends up on paper matters more.