While a big reason for today's rally was a fresh bout of trade deal optimism following an overnight Bloomberg report that the US is preparing for a "final trade deal" that President Trump and Chinese counterpart Xi Jinping could sign in weeks, moments ago Trump appeared to pour gasoline on the carefully scripted theater of trade negotiations between Washington and Beijing - scripted because as most strategists realize very well (or at least they should) there is no way that China will ever accept being dictated terms from the US on how to treat its currency or to never again participate in "technological transfer" as Rabobank's Michael Every explained this morning - when he tweeted that he has "asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions and I did not increase their second traunch of Tariffs to 25% on March 1st."
I have asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions....— Donald J. Trump (@realDonaldTrump) March 1, 2019
Trump then added that this is "very important for our great farmers - and me!"
....and I did not increase their second traunch of Tariffs to 25% on March 1st. This is very important for our great farmers - and me!— Donald J. Trump (@realDonaldTrump) March 1, 2019
It certainly is important to both US farmers and Trump, not the least because if China agrees with the demand, it will show that Trump's lack of action was effectively action, and China has to respond to it with a gesture of goodwill, by de-escalating the trade war first; however and by implication, Trump's demand is also very important to China, as conceding to Trump's "ask" would be seen as a major concession by Beijing, just as the country's stock market has been storming back, an indication that China has regained leverage in the trade war with Trump.
As such, Trump appears to have thrown a major spoke in the wheels of a trade war negotiation that was actually starting to simmer down following media reports that Trump was interested in putting the whole thing in the rear view mirror in order to avoid another bruising market selloff. However, now that he has vocalized the latest US demand in the public arena and not behind closed doors, and with China having no option but to respond similarly, it is unlikely that Beijing will comply without reservations, potentially resetting any progress achieved so far in trade negotiations - pardon theatrical trade negotiations - even as the market has by now priced in a successful resolution to the US-China trade conflict.
And with markets already closed for the week and unable to reprice the sudden shift the negotiation nuance, Sunday night's future open could prove quite volatile.