Election Day a Pivotal Point in Trade War with China

Election Day a Pivotal Point in Trade War with China

Election-day-and-the-trade-war

Finally, the dueling political hit commercials can go away now that the 2018 midterm election day has arrived. The real political maneuvering begins once all the results are known nationally, and that jockeying goes beyond the political parties to foreign nations like China.

Economist Arlan Suderman says China has also anxiously awaited this day in order to gauge the trade negotiating power of President Donald Trump.

“What China is counting on, what China is hoping on, is that Trump is weakened by the elections, that the Democrats take the House back and immediately start impeachment investigations and basically render him a weaker negotiator,” he told HAT. “Whether that will happen or not, I don’t know, but that’s what China is hoping will happen, and therefore they’ll be able to get him to back down from his demands in trade negotiations.”

President Trump and Chinese President Xi are scheduled to meet and talk trade November 30th at the G20 meeting in Buenos Aires. Suderman says the intervening period could tell us a lot about the length of this trade standoff.

“It’s a 24-day window to get something done. Right now, the Trump Administration says China knows what we need to get a deal. They’re just waiting to see if China will make a valid offer during that twenty-four-day window. If it doesn’t happen then it could be a long time. China may try to outlast President Trump, meaning a couple of years. He’s trying to ramp up the pressure saying if we don’t have a deal by November 30 then we’re going to put tariffs on the rest of what we import from China, another $250 billion in products, and then on January 1 those all go up to twenty five percent from ten percent.”

Suderman believes that China wants a deal, and the evidence is that U.S. tariffs are significantly impacting China’s economy. But he says the deal they want is not the kind of deal President Trump is looking for. So, we wait and see, with the election results, whether Trump becomes weakened or emboldened for his future trade negotiations.

Suderman is Chief Commodities Economist for INTL FCStone.

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