Who Knows What’s Real And What’s Spin In The U.S.-China Trade Talks

Today U.S. stocks are moving slightly higher as if they believed that talks Thursday and Friday over will see an agreement between the U.S. and China on trade and tariffs rather than a breakdown in the negotiations. As of 2:30 the Standard & Poor’s 500 is ahead 0.36%, the Dow Jones Industrial Average is up 0.40%, and the NASDAQ Composite has gained 0.21%.

The move higher may be simply a reaction to the strong move down over the past two days–even if no one knows anything betting on a bounce after significant selling isn’t a bad strategy. Or it could be a very muted reaction to a statement from President Donald Trump today that China has indicated it hopes to “make a deal” when senior Chinese officials visit Washington on Thursday and Friday. “We have gotten an indication they want to make a deal; our teams are meeting with their team tomorrow; we will see what happens,” White House press secretary Sarah Huckabee Sanders told reporters after a round of tweets from President Trump. Of course, the markets don’t know what those indictions are, who they might be from, or even if they actually exist. The “indications” may be nothing more than notice from Beijing the a delegation is on its way to Washington to resume talks. That seems to be what the President pointed to in another tweet on Wednesday that “China has just informed us that they [Vice-Premier Liu He] are now coming to the U.S. to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers.” (As many economists have noted, China doesn’t pay the costs of the higher tariffs. Instead they come out of the pockets of U.S. consumers who are charged higher prices as companies pass along the tariffs.)

There’s a whole lot of spinning going on.

And it’s not limited to Washington, by any means.“Escalating the trade conflict is not in the interest of the people in both countries and the world. China deeply regrets the move,” China’s Commerce ministry said in what strikes me as an effort to pin the blame for any breakdown in the talks on the United States. And the ministry added that China will “have to adopt necessary countermeasures” if the U.S. implements its plan to raise duties.

Over the weekend President Trump warned in a series of tweets that the U.S. would raise tariffs on $200 billion of Chinese exports to the United States to 25% from 10% at 12:01 a.m. New York time on Friday. And that the U.S. would implement 25% duties on an additional $325 billion of Chinese goods if China didn’t show good faith progress in the talks.

Amidst all the talk, the office of the U.S. Trade Representative took a formal step today toward implementing the higher and wider tariffs by publishing a Federal Register notice confirming that duties will increase.