May 6, 5:00 pm EST
Late last week, the White House floated the idea that a trade agreement with China could come by this coming Friday (May 10).
And then Trump did this yesterday …
Why would Trump risk complicating a deal, even more, by threatening China with a deadline/ tariff increase? Because he has leverage. He has a stock market near record highs, and a strong economy and the winds of ultra-easy global monetary policy at his back.
China, on the other hand, has an economy running in recession-like territory, with key data just (recently) bouncing from global financial crisis era levels. And Chinese stocks, after soaring 34% since January 4th, have given back 12% from the highs, in just seven days. And they’ve just fired a ton of fiscal and monetary policy bullets to stimulate the economy – which could be diluted by a more expensive and indefinite trade war.
So, Trump has a win-win going into the week. If the threat works, he gets a deal done, and likely gives less to get it done. If China backs off, stocks go down, and he gets the Fed’s rate cut he’s been looking for – stocks go back up.
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