Investors’ eyes around the globe will be transfixed on the G-20 Summit meeting in Buenos Aires, particularly on Saturday when U.S. President Donald Trump and China president Xi Jinping will be meeting to discuss the trade war between the two economic superpowers, but what can be expected once the dinner plates are cleared?
The tit-for-tat tariff wars have resulted in the U.S. imposing duties on $250 billion worth of Chinese goods with China retaliating with their own tariffs on $110 billion of American imports–costly ramifications for both nations, but the pain hasn’t been relegated to just those two. The trade wars have been causing a negative ripple effect on other international markets, particularly emerging markets, which have been on a downward spiral.
Needless to say, the world will be watching in some form or fashion, but experts are positing that the byproduct of the Trump-Xi meeting could come in various forms.
1. No Deal
Prior to his departure to the G-20 Summit on Thursday, President Trump spoke with reporters at the White House where he was tepid about a possible trade deal.
“I think we’re very close to doing something with China but I don’t know that I want to do it,” Trump said. “Because what we have right now is billions and billions of dollars coming into the United States in the form of tariffs or taxes, so I really don’t know.”
Trump’s reticence to confirm that a substantial agreement is in place, if there is any at all, could be a signal to the capital markets to not expect anything substantial. Not leaving the G-20 Summit with a deal in place could also continue to pressure China if President Trump scoffs at the details of a proposed agreement.
“Trump may want to keep the threatened increase as a way to further pressure China into a deal,” analysts from Geneva-based Pictet Wealth Management wrote in a report last week.
2. Further Tariffs Cease
An agreement to a ceasefire with respect to tariffs would be positive for the capital markets, as any news regarding further tariffs between the U.S. and China have roiled the major indexes in the U.S. and abroad. This would also leave the door open for further high-level negotiations between the Trump and Jinping should nothing substantial materialize from the G-20 Summit meeting.
Ongoing discussions between the two economic superpowers is certainly better than no discussions at all.
“Because there have been really no substantive negotiations over the last several weeks or months, at most, there might be an agreement for the president to withhold further tariffs, not adding to the tariffs already imposed on some $250 billion worth of goods coming from China, in exchange for discussions over the next several months,” said Gary Locke, former U.S. ambassador to China.
3. Meeting in the Middle
With the trade war reaching an impasse for both nations, meeting in middle on their differences could produce a substantial trade agreement that’s beneficial for both sides–of course, this would be the best-case-scenario option for investors. For the U.S., it means China will need to agree to more flexible policies regarding market access and stronger intellectual property protection.
“At present both countries economic teams are maintaining close contact to put into effect the spirit of the consensus reached by the two leaders in their telephone call on Nov. 1,” said Foreign Ministry spokesman Geng Shuang at a news briefing.
“We hope the U.S. can show sincerity and meet China half way, to promote a proposal that both countries can accept,” Shuang added. “At the same time we also hope that with the hard work of both sides, the Argentina meeting that will shortly take place between the leaders of China and the United States can achieve positive results, to set the direction for the next stage in the development of China-US ties.”
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