Kudlow Feeds Optimism That a China Trade Deal Is Within Reach
Investors are dissecting every utterance from the U.S. and China for signs of progress or imminent failure of phase one of a big trade deal.
The latest commentary from the Chinese side put hardly any emphasis on how close they are to a signing ceremony date. The two are talking and “China is willing to work with the U.S. to address each other’s core concerns and to create conditions for reaching a phase-one agreement,” Ministry of Commerce spokesman Gao Feng said yesterday.
White House economic adviser Larry Kudlow, speaking to reporters after an event late Thursday in Washington, injected a little more color and optimism on the timetable. He said the U.S. is communicating “every single day now” with their counterparts in Beijing. While it’s not a done deal yet, “we’re coming down to the short strokes,” he said.
The phrase “short strokes” has some interesting meanings going back to the 18th century, according to a 1987 column by William Safire, who also cited House testimony in which former U.S. Secretary of State George Shultz used the phrase to describe a stage in Cold War-era negotiations with the Soviet Union.
So let’s assume Kudlow was referring to the more modern inference of the phrase: a short stroke in golf — a chip shot to the green perhaps — or the most precise and nerve-wracking final strokes of a painter. Stock investors liked the sound of the proximity that Kudlow described, bidding up shares from Asia to Europe and pushing U.S. equity futures toward Wall Street’s longest weekly rally in more than two years.
It’s just the latest chapter in a 20-month-long saga that Bloomberg reporters Jenny Leonard and Shawn Donnan chronicled in the latest edition of Bloomberg Businessweek. What started as a surgical use of tariffs to slowly pressure China into reforms descended into a more unpredictable process that’s deepening uncertainty and chipping away at both economies.
If it all went smoothly, Presidents Donald Trump and Xi Jinping were supposed to be signing phase one this weekend at an Asia-Pacific leaders’ summit in Chile, until the conference was cancelled amid social unrest there. Kudlow seems relatively confident that the finishing touches are almost upon us.
Charting the Trade War
The Trump administration’s trade war is ravaging exports to China across the U.S. and well beyond the farm belt. More than 30 states stretching from Florida to Alaska suffered double-digit drops in merchandise exports to China through September of this year. Sales to the Asian nation fell 39% in Texas, where oil and gas products comprise the largest export to that country.
Today’s Must Reads
- Shipping worry | Maersk, the world’s biggest container-shipping company, signaled it’s less optimistic about growth in its industry as trade wars dent the economic outlook.
- Irresistible China | Foreign companies continue to invest more in China even after Trump called on U.S. firms to look elsewhere, as the rising spending power of 1.4 billion people proves too hard to resist.
- Trade hangover | Kentucky, where 95% of bourbon is produced, has been hurt by retaliatory tariffs worldwide and distillers are winding up collateral damage of the trade war.
- Asian surprise | Indonesia posted a surprise trade surplus in October even as exports contracted for a 12th straight month, as slumping imports underscored concerns about Southeast Asia’s largest economy.
- Decades of pain | Jack Ma, the co-founder and former chairman of Alibaba, said the U.S.-China relationship could face 20 years of “turbulence” if the two superpowers mishandle trade.
Tech threat | The concentration of power in only a handful of dominant tech companies may create a national security threat that requires federal intervention, including antitrust action, a Democratic Federal Trade Commissioner said.
Malaysia slowdown | A broad-based economic slowdown may persist into 2020. Even if a U.S.-China trade deal emerges, there will still be considerable uncertainty about U.S. policy until the presidential election next November.
- Nov. 20: Japan trade balance
- Nov. 21: South Korea exports and imports
©2019 Bloomberg L.P.