Is the Expectation of a U.S.-China Trade Deal Overblown?

Saturday could be a make or break moment for a U.S.-China trade deal as U.S. President Donald Trump and China’s Xi Jinping will meet at the G-20 summit to hopefully iron out their differences on a trade deal that was supposed to happen earlier this year. With the capital markets poised to respond to the upside if a deal is done, is this optimism overblown?

“The rhetoric coming out of China has changed a lot. China is digging in its heels,” said Invesco’s Kristina Hooper, the firm’s chief global market strategist. “So, unless the U.S. is willing to take minor concessions around narrowing the trade deficit, I don’t think we’re going to see a deal.”

However, who needs a trade deal when the U.S. economy can maintain its current growth rate? It’s a question that investors weren’t asking in May when the volatility stricken month sent the capital markets in a daze, but Larry Kudlow, director of the National Economic Council, thinks this is no longer the case.

“The U.S. economy is very strong,” Kudlow told CNBC’s “Power Lunch. ” “I think we’re in very good shape and I think we’ll maintain a 3% growth pace this year.”

“That 3% number is not contingent on a China deal that might not be satisfactory for American economic interests,” Kudlow added. “What has changed is lower tax rates, massive deregulation, opening up the energy sector and various trade reforms.”

Kudlow’s comments come after the U.S. economy added just 75,000 jobs last month, falling below the  expectations of economists polled by Dow Jones who were forecasting a gain of 180,000 jobs. In addition, manufacturing activity in the U.S. grew at its slowest pace last month since October 2016.

Still, this doesn’t faze Kudlow’s view on the strength of the economy.

“I wouldn’t put much stock in one month’s jobs number. There’s lots of other evidence” of a strong economy, Kudlow added.

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