Update: In its desperation to report positive trade headlines, sometimes the American financial press can be a bit overeager, to the point of forgetting to double-check their translations.
But as one twitter user pointed out, the headline that sent equities higher this morning wasn't exactly correct.
- China, U.S. agree to phased tariff rollback as deal progresses
As it turns out, the Commerce Ministry didn't say that, it merely said that an agreement must include notable tariff reductions or Beijing won't agree to it.
商務部：中美達成協議的重要條件是同步等比率取消已加徵關稅】商務部新聞發言人高峯在7日的新聞發佈會上表示，如果(中美)雙方達成第一階段協議，應當根據協議內容，同步等比率取消已加徵關稅，這是達成協議的重要條件。— Simon Ting (@simonting) November 7, 2019
Pls Google translate yourself. Lousy news but market treats as good news...
Bloomberg将個消息翻譯成達成協議！真係笑死人！— Simon Ting (@simonting) November 7, 2019
This was the Bloomberg headline... ... Alas... pic.twitter.com/scxUlPU0PA— Simon Ting (@simonting) November 7, 2019
They weren't the only one to point out the discrepancy between the report and the statement.
When i translate the Chinese statement that moved the market last night it doesn't seem like there is anything new? pic.twitter.com/yKUXCyBJMq— FxMacro (@fxmacro) November 7, 2019
As @simonting says, its lousy trade news masquerading as good news.
* * *
Followed by days of anxious speculation about the fate of the "Phase 1" trade deal, Bloomberg reported Thursday morning that the US and China had reached an informal deal on tariff reduction. The deal was structured to work in phases, with tariffs coming off gradually, according to a spokesman from China's Ministry of Commerce.
If Washington confirms a deal, it could unleash another round of unbridled optimism across global markets (resulting in the "melt-up" that some have warned about) and alleviate fears of an imminent global recession.
The Commerce Ministry's Gao Feng said negotiators have, over the past couple of weeks, agreed to the tariff reductions as progress is made.
"In the past two weeks, top negotiators had serious, constructive discussions and agreed to remove the additional tariffs in phases as progress is made on the agreement," spokesman Gao Feng said Thursday.
"If China, U.S. reach a phase-one deal, both sides should roll back existing additional tariffs in the same proportion simultaneously based on the content of the agreement, which is an important condition for reaching the agreement," Gao said.
Beijing's No. 1 demand since the beginning of talks has been the reduction of American tariffs, which currently apply to the bulk of Chinese goods entering the US. And with November 2020 just one year away, it's in President Trump's best interest to do everything he can to avoid upsetting the economic apple cart.
Stocks around the world rallied, and US futures popped on the news.
Of course, all of this could easily prove premature; it's still not exactly clear what was agreed upon.
"The question right now is what the two sides have actually agreed on - the market’s focus has shifted to how the US may react to China’s tariff remarks tonight or in coming days," said Tommy Xie, an economist at Oversea-Chinese Banking Corp. "Investors are still cautious."
In recent days, it started to look like the disagreement over where to hold the talks to finalize the agreement might blossom into a side-issue.
Proposed US locations for a Trump-Xi meeting that had been proposed by the White House, including Iowa and Alaska, have been ruled out, and those in charge of planning the summit are looking at locations in Europe and Asia.
Of course, this isn't the first time we've seen leaks about an imminent deal, only for talks to unravel at the last minute. Iris Pang, an economist at ING Bank, said she doubts the talks will progress quickly.
"I am skeptical on how fast the progress will be," said Iris Pang, economist with ING Bank NV in Hong Kong. "How fast the roll back will be is critical to get material and long lasting positive sentiment for the market as well as for both economies."
And with Beijing and the US set to hold a joint press conference to share information about a crackdown on fentanyl smuggling that disrupted a criminal network importing large quantities of the stuff.