China Says US, China Won't Impose Dec 15 Tariffs, But Existing Tariffs Remain

Update: after much confusion, China is now confirming some of the details revealed overnight, whiled denying others despite the country's stern silence overnight. Here are the highlights from the press conference

  • CHINA: U.S. TO REMOVE TARIFFS ON CHINESE GOODS IN PHASES
  • CHINA: FIRST PHASE TRADE TALKS HAVE ACHIEVED MAJOR ADVANCEMENT
  • CHINA: THE DEAL WILL HELP BOOST GLOBAL MARKET CONFIDENCE
  • CHINA: WILL COMPLETE ASAP TRANSLATION, LEGAL REVIEW OF DEAL
  • CHINA: TO INCREASE IMPORTS FROM U.S. AND OTHERS
  • CHINA: SIDES AGREE TO COMPLETE LAST STAGES AS SOON AS POSSIBLE
  • CHINA: WILL WORK TO SET A DATE FOR SIGNING DEAL
  • CHINA: HAS DECIDED TO CANCEL TARIFFS SCHEDULED TO TAKE EFFECT ON SUNDAY
  • CHINA: U.S. HAS PROMISED TO CANCEL ADDITIONAL TARIFFS ON CHINESE PRODUCTS

Some details on agri products:

  • CHINA PLANS TO IMPORT U.S. WHEAT, RICE, CORN WITHIN QUOTAS

Yet the confusion grows because contrary to the US spin on the deal, China refuses any mention of boosting agri imports:

  • CHINA DIDN'T ANSWER QUESTION ON SIZE OF AG BUYS FROM U.S.
  • SOY, HOGS PARE GAINS; CHINA SAYS NO DETAILS YET ON AG IMPORTS

This confirms that China opposes any contractual agreement to boost US imports as that would put Chinese farmers at a disadvantage, and forcing Beijing to provide stimulus.

In conclusion:

  • CHINA: ARE TALKING ABOUT TIMING, PLACE, DETAILS OF SIGNING DEAL

It is unclear if both sides will sign their own version of what the deal says.

Bottom line: the December 15 tariffs will not be imposed, but existing tariffs will not be rolled back even though China says the US has "promised" to do so in phases. In other words, once again there is no actual Phase 1 deal, there is just an agreement to avoid a new round of tariffs with both sides making vague promises.

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Watch Live (China says briefing delayed a half an hour, to 10am ET... which means it will begin just as the House Judiciary Committee is being gaveled in to vote on articles of impeachment):

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The market appears convinced this is everything we've been hoping for but the radio-silence from China (along with leaked rumors of concerns about the terms - which "will never be made public") has some fearing this is a Trump adminiustration play to maneuver the narrative, forcing China into a corner as the 'bad guy' if no deal is actually agreed by Sunday night.

Chinese officials will give us their side of the story, Reuters is saying that will happen at 10:30 p.m. local time, 9:30 a.m. NY time

The Beijing officials briefing on trade @ 9:30am ET:

  • Ning Jizhe, Vice chair of Nat'l Development & Reform Commission

  • Liao Min, Vice Min of Finance

  • Zheng Zeguang, Vice Min of Foreign Affairs

  • Han Jun, Vice Min of Ag and Rural Affairs

  • Wang Shouwen, Vice Min of Commerce

As we tweeted, algos have a few minutes to learn Chinese...

Putting this all together, President Trump's self-proclaimed phase one trade deal is likely a proposal at the moment for the Chinese. And even if the Chinese agree to it, it may never become public. 

How to make sense of all of this? Recall that earlier this week, Peter Navarro was complaining that China had taken control over the narrative. So by laying out the terms of the "concluded" deal, it is possible the Trump administration is seeking to force the Chinese into an agreement so Trump can get a political win, because that's really what a phase one deal is about. 

Should the Chinese reject the terms of the proposal, such as the massive $50 billion in agriculture purchases, Trump can now effectively scapegoat China for blowing up the trade deal, just as he did back in May, which brings us back to the Trade war cycle...

As Rabobank warned earlier,

"We have been promised this gift many times, and each time it has turned out to be an empty box. We need to see China publicly agree too. We need to see the text of what it is agreeing to. And we need to see it signed, sealed, and delivered. However, the optics certainly appear to be that we are closer to a deal than we have been for some time...unless this is Trump conducting public negotiations to then frame China as the bad guy for walking away from his “great deal”, which one cannot rule out. "

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Update (9:25amET): It's hardly a surprise, but Axios's Jonathan Swan reports that President Trump specifically objects to the detail in the WSJ story claiming that the US would rollback existing tariffs by half.

Allowing such generous rollbacks would sacrifice a lot of leverage for the next round of talks...and neither Trump nor President Xi want to look weak.

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President Trump just poured cold water on the brightest aspect of his shiny new (reported) trade deal by dismissing claims that prior tariffs will be rolled-back as reported by WSJ yesterday...

And the result...

Yuan has puked...

Source: Bloomberg

And stocks are fading fast...

And copper has given up all of yesterday's gains...'

sigh...