Stocks Tumble After Lighthizer Says "Too Early To Tell" If Trade Deal Happens

Update: The tensions between the China hawks (led by Lighthizer), who insist that Trump refuse to cave to Beijing and strike a deal that would be tantamount to a payoff in the form of agricultural purchases, and President Trump's purported willingness to jump at any possible deal have already surfaced in Lighthizer's testimony on Wednesday, sending stocks lower...

Two

Nasdaq is leading the drop...

The yuan, another barometer of perceived trade-deal odds, also weakened.

Yuan

In the clearest sign yet that Lighthizer is trying to delay, or kill, the deal, the trade rep and trade delegation leader said more purchases of agricultural products from China are "not enough" to secure a deal, and that US issues with Beijing are "too serious" for ag purchases to resolve. 

Lighthizer said that provisions to ensure Beijing sticks to the deal, as well as significant structural changes to the Asian nation's economy, must be part of any deal. He added that much work still needs to be done to secure a deal.

"This administration is pressing for significant structural changes that would allow for a more level playing field - especially when it comes to issues of intellectual property rights and technology transfers," Lighthizer said

Right now, it's "too early to tell" if any of this will happen," though he acknowledged that Trump and Xi are planning to meet next month to try and iron out some of these lingering issues.

  • LIGHTHIZER SAYS MORE CHINA PURCHASES ALONE NOT ENOUGH FOR DEAL

  • LIGHTHIZER SAYS ANY CHINA AGREEMENT MUST BE ENFORCEABLE

  • U.S. TRADE REPRESENTATIVE LIGHTHIZER SAYS TOO EARLY TO PREDICT OUTCOME OF U.S.-CHINA TRADE TALKS - WRITTEN STATEMENT TO HOUSE WAYS AND MEANS COMMITTEE 

  • LIGHTHIZER SAYS U.S., CHINA SERIOUSLY ENGAGED AT HIGHEST LEVEL, SIGNIFICANT PROGRESS HAS BEEN MADE 

  • LIGHTHIZER SAYS U.S. PRESSING FOR SIGNIFICANT STRUCTURAL CHANGES BY CHINA, PROBLEMS TOO SERIOUS TO BE RESOLVED WITH ADDITIONAL PURCHASES OF U.S. GOODS 

  • LIGHTHIZER SAYS ANY U.S.-CHINA TRADE AGREEMENT MUST BE ENFORCEABLE BECAUSE CHINA FAILED TO KEEP PAST PROMISES

  • LIGHTHIZER SAYS U.S. FOCUSED ON ENSURING IT CAN ENFORCE TRADE DEALS 

  • LIGHTHIZER SAYS 2018 U.S. TRADE DEFICIT WITH CHINA ON PACE TO EXCEED $417 BLN-WRITTEN HOUSE TESTIMONY 

  • LIGHTHIZER SAYS CHINA PRESENTS MOST SEVERE CHALLENGE EVER FACED BY U.S. TRADE POLICYMAKERS

  • LIGHTHIZER SAYS CHINA 'VERY AWARE' OF CONGRESS' STRONG DESIRE FOR STRUCTURAL CHANGES

  • LIGHTHIZER SAYS CONGRESSIONAL SUPPORT 'CRITICAL IN PERSUADING CHINA TO TAKE OUR CONCERNS MORE SERIOUSLY' 

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Just in case Powell's second day of Congressional testimony coupled with Michael Cohen slamming  his former boss, president Trump, in a parallel testimony on the Hill were not enough to keep traders busy, today at 10am US Trade Rep Robert Lighthizer will also be testifying to the House Way And Means Committee  on the current state of US-China trade talk. Courtesy of RanSquawk here is what to look for in his testimony.

1) China trade deal details? US President Trump pushed back the decision to apply additional tariffs on China, citing "substantial progress" that has been made in talks. Hopes therefore have been raised that the two are close to a trade deal, which could be signed off by Trump and China President Xi sometime in March. However, recent communicatoins from officials have essentially failed to provide any meaningful detail on the nature of the progress, and the exact commitments China has made. The FT writes that markets would like details on China's purchase of US goods (it is expected to ramp up agricultural imports), what steps will be taken to protect US intellectual property rights (amid claims China has been stealing it from US companies), what exactly has China committed to regarding FX stability (it has pledged stability, though this is a line the PBOC has been taking for some time), what agreements has China made with regards to subsidies of its state-owned enterprises, and how any deal between the two nations will be enforced? Additionally, if a deal is reached, how will tariffs be adjusted?

2) How strained is the relationship between Lighthizer and Trump? The NYT today writes that as Trump backs off from his threat to impose higher tariffs, the President's relationship with Lighthizer is showing signs of strain, and adds that while broad tariffs on Chinese imports brought Beijing to the negotiating table, Trump has grown impatient with the talks, and a consensus is growing in Washington that Trump will ultimately accept a weak deal.

3) Is USMCA dead in the water? Business Insider reported that Lighthizer met Democrats on the Ways & Means Committee on Tuesday to field questions about the USMCA; Democrat House Majority Leader Steny Hoyer characterised the White House as not actively pushing Congress to pass the deal, with Business Insider also reporting that Republicans have suggested that the USMCA might already be dead in the water.

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Ahead of the testimony, CNBC's Carl Quinatnilla notes that according to Strategas, Lighthizer may use today's testimony to "make a last-ditch effort to slow down" POTUS's push for a deal" as he has been "unhappy with the reforms the Chinese have committed to so far and that [POTUS] is compromising too much."

Depending on what trade hawk Lighthizer says, it is possible that the recent surge in optimism about an imminent US-China trade deal could be materially dented, resulting in further selling across risk assets.

Watch the hearing, which is set to begin at 10am ET, live below: