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Stocks Briefly Slide After WSJ Reports US Officials Have Become “Less Optimistic About A Deal”

Courtesy of ZeroHedge View original post here.

Moments before 3pm, stocks suddenly slumped, following the latest running update to the WSJ's article on the ongoing state of US, China trade talks, according to which even though "China's Commerce Ministry said that negotiating teams from both sides have maintained close communication", over the past few days "officials in the U.S. have become less optimistic about a deal." The reason: "the two sides remain at odds over the value of farm goods Beijing will buy from the U.S., with President Trump looking for $40 billion to $50 billion a year within two years."

That, as we reported several week ago, would represent an enormous increase from the $8.6 billion last year—and twice as much as China bought from the U.S. before the trade war began in earnest in 2018.

As part of the ongoing discussion over farm purchases, the Trump administration wants Beijing to publicly state its purchasing plans—and not to condition them on market circumstances or China’s trade obligations, while Beijing "is reluctant to make that pledge because it might have to divert purchases from other trading partners that are bound to object."

Perhaps more importantly, the two sides haven’t yet agreed on how deep a reduction in tariffs the U.S. would make. As a reminder, currently, the U.S. has tariffs on about $360 billion of Chinese goods. Unless there is a deal by Dec. 15, the U.S. is threatening 15% tariffs on $165 billion more in Chinese imports.

And the potential dealbreaker – while the U.S. side is willing to skip the next tariff increase, Trump and Robert Lighthizer "are reluctant to start scrapping tariffs. Their willingness to do so depends largely on how many farm goods the Chinese will buy—and how firmly it will commit to the purchases, say the people familiar with the talks."

In short, the trade war remains a game of chicken, one in which someone has to blink first, and neither side is willing to do so.

In kneejerk response to the WSJ article, ES tumbled almost 10 points, however it has since regained its entire loss and was last seen trading at HOD because according to some bulls, the fact that there is no deal is evidence that there will, magically, be a deal in the next 10 days before the US is expected to hike tariffs on another $165 billion in Chinese imports.

 

 


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