Submitted by Michael Every of Rabobank
An old Soviet joke
Lo and behold - there has been another delay to the “phase one” US-China trade deal!
It didn’t happen in October. It won’t happen in November. Now it might happen in December. Or it might not. Bloomberg “market pricing” odds are currently around 62%, which is about right considering that the Reuters news report of the delay was accompanied by this quote: “The official, who spoke on condition of anonymity, said it was still possible the ‘phase one’ agreement aimed at ending a damaging trade war would not be reached, but a deal was more likely than not.”
Luckily, the nasty news was preceded by some really strong German data (factory orders up 1.3% m/m), a signal which for once does perhaps portend better times ahead for global manufacturing. Nonetheless, back to what, as we argued yesterday, is supposed to matter the most: the trade war and ‘deal’.
When will it be signed? December? January? February? Just before the election (or Trump’s impeachment)? Yes/No/Maybe.
Where will it be signed? Apparently not in Alaska, or Iowa, or Honolulu, or anywhere in the States (which would always have been an odd choice of political signalling for China). Perhaps London? Or Switzerland? Or Asia? Bangkok can keep a few room from the ASEAN summit on hold if both sides want, but it’s high season, so please decide on timing soon. Yes/No/Maybe.
What will be signed? Delay of new USD125bn 15 December tariffs, now possibly overlapping the deal? Removal of September’s tariffs? Of the larger USD250bn tariff package? Yes/No/Maybe. Intellectual property rights protection? (Please ignore new Chinese data protection laws requiring all key info for firms doing business there to be stored in China and hence accessible to Beijing anyway.) Yes/No/Maybe. More Chinese agri purchases? This week has seen pledges to buy more from Canada and France, but not from the US, so again Yes/No/Maybe. A US enforcement mechanism with teeth? Yes/No/Maybe. China opening up its financial markets to try to get hold of more desperately-needed USD? Yes – full-stop. But that was always going to happen regardless precisely because it needs those dollars…and the US is taking tentative steps to stop the flow of capital to China’s markets anyway!
As the title of the Daily says, this ‘when will it arrive?’ shtick all reminds me of an old Soviet joke:
A man walks into a Soviet car showroom with a suitcase and says “I want to buy a car.” The salesman, totally disinterested, says, “We need cash in full in advance.” The man opens the suitcase and says, “I have it in full here.”
The salesman says, “OK. You get no choice of model details, understand?” The man agrees. Then he asks, “So when do I get it delivered?” The salesman opens his order book and says, “Mmmm….Five years from now.”
The man scratches his head thoughtfully and asks, “Morning or afternoon?”
The salesman retorts, “What do you care what time it comes? This is five years from now!”
The man replies, “Well, I am having my washing machine delivered in the afternoon.”
The Soviet joke is also a segway back to the UK election campaign now underway, where Jeremy Corbyn has already been dubbed “Stalin” by PM BoJo…because “he doesn’t like the profit motive”. Of course, that was Stalin’s biggest flaw – his dislike of profits (**rolls eyes**): Solzhenitsyn is withering in Gulag Archipelago about the punitive marginal tax rates of the regime.
It’s early doors, but so far we have seen one Tory front-page apology for thoughtless comments over the Grenfell fire, and one minister resigning for involvement in a legal scandal. So a good, confident start from the Blues with their “Let’s Get Brexit Done” campaign theme.
We have also just had Labour Deputy Leader Tom Watson resign and drop out of the election completely. Watson is regarded as a key centrist figure, and had been outspoken over both Brexit (he favours Remain) and antisemitism in the party; in the eyes of some centrist critics, Labour is now dominated by people who want UK car showrooms to look Soviet: will that resignation see Labour lose votes to the Lib Dems, muddying the political waters even further? Note that the Liberal Democrats campaign is basically “Let’s Get Brexit Done In”, while Labour’s is now “Let’s Let You Get Brexit Done”.
It’s almost a (bad) old Soviet joke of its own.