Just as the US trade delegation was set to leave for the first round of in-person talks with their Chinese counterparts since the latest Trump-Xi truce, President Trump sent out a furious series of tweets accusing Beijing of failing to live up to its promise to buy more American agricultural products - apparently "there are no signs that they are doing so" - while bashing the Chinese economy and suggesting that it might be better for the US in the long run to wait until after the 2020 election to make a deal, because "when I win, the deal that they get will be much tougher than what we are negotiating now...or no deal at all. We have all the cards, our past leaders never got it!"
Though, if Beijing gets lucky, they might get "one of the Democratic stiffs like Sleepy Joe. Then they could make a GREAT deal, like in the past 30 years..."
China is doing very badly, worst year in 27 - was supposed to start buying our agricultural product now - no signs that they are doing so. That is the problem with China, they just don’t come through. Our Economy has become MUCH larger than the Chinese Economy is last 3 years....— Donald J. Trump (@realDonaldTrump) July 30, 2019
..My team is negotiating with them now, but they always change the deal in the end to their benefit. They should probably wait out our Election to see if we get one of the Democrat stiffs like Sleepy Joe. Then they could make a GREAT deal, like in past 30 years, and continue— Donald J. Trump (@realDonaldTrump) July 30, 2019
...to ripoff the USA, even bigger and better than ever before. The problem with them waiting, however, is that if & when I win, the deal that they get will be much tougher than what we are negotiating now...or no deal at all. We have all the cards, our past leaders never got it!— Donald J. Trump (@realDonaldTrump) July 30, 2019
Surprisingly, the market's reaction to Trump's tweets was muted, though futures eventually moved lower. Still, it says a lot about what's really driving the market.
Amazing how the China deal bullshit supposedly added hundreds of points to the S&P and now that it's collapsing there's minimal reaction. Clearly, this entire move is REALLY about money-printing. https://t.co/wYUkhaXuVp— Mark B. Spiegel (@markbspiegel) July 30, 2019
With the FOMC's two-day policy meeting set to begin on Tuesday, Trump just gave us the clearest indication yet that this market is all about the Fed. And with the Fed's rate cut fully priced in, futures on the S&P 500 touched session lows after Trump’s remarks.
To recap where we are, following the escalation in May where the US imposed higher tariffs on China and President Trump accused China of trying to renegotiate the agreement at the last minute, the US and China reached a truce and agreed to resume talks last month at the G20 meeting in Osaka. At the meeting, President Trump opted not to put tariffs on the remaining $300bn of Chinese imports which had been threatened, and also offered a concession on Huawei, while China agreed to buy more products from the US. Little has been heard since though on how things are progressing. The longer things remain uncertain the more risks there are to the global economy. This is one of the biggest dilemmas for the FOMC as they today start their 2-day meeting ahead of tomorrow’s announcement.