Report Says ‘Phase 1’ Deal With China Isn’t Sure Thing Yet — And Markets Take Note
On Friday, President Donald Trump lauded a proposed agreement between his administration and representatives of China, called the “phase one” deal, which would allow some agreements between the two nations to come about as more talks resume regarding the trade wars between the two.
The deal would call on China to purchase tens of billions of dollars of agricultural products from the U.S. and also require Beijing to manage its currency in a way agreeable to Washington. In return, tariffs that were set to be imposed on China this week by Trump will no longer occur, the New York Times reported last week.
While a positive development in trade talks, the deal wasn’t quite finalized when it was initially announced. Still, markets reacted positively to the news last week, with the Dow Jones Industrial Average, for example, going up more than 300 points on Friday.
But stock futures predicted a possible loss for markets when they open on Monday, due to reports that China may not yet fully embrace the “phase one” plan.
— Nitza Barky (@NitzaBarky) October 14, 2019
CNBC reported that China’s President Xi Jingping has not yet signed off on the deal. According to sources familiar with China’s side of the talks, there are more details that need to be ironed out within “phase one,” and Vice Premier Liu He may send more representatives to Washington in order to hash things out.
One of the things China wants added to the deal, for example, may be tariffs that are planned by the U.S. to take place in December, should a bigger deal not be made by then.
Initial reports about the “phase one” deal warned investors not to be too optimistic about its chances, as analysts called it a “temporary truce” rather than an actual deal at this point.
Markets in Asia on Monday performed positively, but after reporting on China pumping the brakes, so to speak, on the “phase one” pact, markets in Europe reacted negatively, according to data obtained at 8 a.m. Eastern Time from CNN. It remains yet to be seen, as of press time, how U.S. markets will perform upon these reports.