Weekly Economic Report
Our immediate reaction to the widely anticipated Trump-Xi meet at the G20 is that it accomplished the absolute minimum necessary to produce a positive spin in media both in the US and China. Xi promised to buy more agricultural goods, reiterating promises already made but postponed before the meeting, boosting Trump in key states and reducing the need for further farm bailouts. Trump promised to back off somewhat on the throttling of Huawei, just as he did with ZTE earlier, but left all other tariffs in place. Then, they agreed to deliberate over the same remaining 10% of issues they had failed to resolve in earlier negotiations – only now with higher tariffs and stiffer sanction in place on both sides already. Bottom line, they bought several months of breathing space before the next round of face to face negotiations in November. In the run up to those meetings, we would expect another blast of negative sentiment about how disingenuous the other side has been during the proceedings. In our view, this is very much like the kick the can routine going on in the Brexit negotiations – and, like Brexit, the ultimate most-likely outcome keeps getting worse, rather than returning closer to the previous -- and desired -- free and open trade norm.