Trump would walk away from a bad China trade deal

Channel: Fox Business
Published: 05/06/2019

'The Coming Collapse of China' author Gordon Chang and Federated Investors Chief Market Strategist Phil Orlando on U.S. trade negotiations with China. FOX Business Network (FBN) is a financial news channel delivering real-time information across all platforms that impact both Main Street and Wa...

Yeah but the president said he wasn't gon na do a deal if it wasn't a good deal. He was pretty clear about that and he walked in just in north korea. He walked up way from the table because he liked where things were going so he's already demonstrated to the world a propensity to if you don't like what you're getting walk away. So is this a good thing, then phil, orlando, that the president is say ...
ng we're not going to agree to something: that's not a good deal. Should we just overlook this 500-point sell-off today, because you point out that we're up 25 percent since the bottom in december? Well, i don't think you need to overlookit, nor should you overlook it, but perhaps there's a sense of complacency on the part of the chinese here now remember that as trump was ratcheting up the tariff pressure. Last year the shanghai index came down by 31 % and that chinese gdp last year was only six point: six percent, the weakest economic growth we've seen in in twenty eight years now, over the first four months of this year, the shanghai index has rebounded and has Gotten back most of what had lost last year, so perhaps the the chinese have sort of this false sense of complacency that everything's, fine and - and we can, you know, make some new demands of our own trump. I thinkhas been very clear that if we don't get a deal that we think is good, fair, equitable, we're gon na walk away, much like he did with the north koreans with the with the nuclear deal earlier earlier this year. So i think that this is very symptomatic of trump's negotiating style and, and the chinese have to come to the table with something that that the united states believes is fair and equitable. It'S important to point out the market backdrop which the wall street journal writes about today is that the vast majority of asset classes are moving in lockstep all higher that 90 % of 70 financial asset classes have posted positive total returns through the month ofapril in bonds. Credit market product stocks, commodities even crypto currencies, even bitcoin, and so the issue is that: does this tweet not just reintroduce volatility that is fleeting but more lasting? Again, it's hard to read whether investors get really upset, and it's like is this? What we're gon na have to deal with when people are asking the question of like what does the market look like for the rest of the year, with this incredible run, like is this volatility? Does it go away or not? Well, i think, when you think about the market here, it has had an incredible run since the christmas eve lows, and i think that part of that has had to dowith the fed okay. But i think that it's kind of interesting every time that the market has a strong run like this gets to new highs valuations start to get stretched. It'S almost like this trade issue comes up, brings us back down to reality, but president trump is negotiating here from a position of strength.

If you look at the economic data, we have seen an improvement through the course of the first quarter right and so he's feeling very confident. But my question to you, gordon, is the 2020. Elections are right around the corner. We can afford to be tough and take a hard-line stance here right now and for the greater good of our economyfor the longer term, but when does his his stance changing or the chinese betting on that? Well, i think that 2020 actually argues for him not doing a deal, because you know he's got to win those big industrial states. He can't flop on these issues and he's probably gon na win the heartland anyway, you know, even if there are chinese tariffs on us agricultural products, so i think that he's probably thinking you know a deal for him is not necessarily good, especially with all the things That he's been saying in the past, with manufacturing job creation hasn't been great. In the last couple months we did have a positive print for the month of april payrollswere up 4,000, but that was short of expectations, and then they were actually down 6,000 in the month of march. So we'd have this kind of renaissance in manufacturing and in job creation there, but lately it hasn't been that great now the national economic council director larry kudlow responded to the president's tweet. He was not america's news headquarters yesterday. Here'S what he said, president, as i think issuing a warning here yet that you know we've been over backwards earlier. We suspended the 25 percent hour up to 10:00 and then we've left it there. That may not be forever. If the talks don't work out, china has got to end it's unfair, non reciprocal trading, systemthey're breaking the laws we hope they'll come around with this deal, but if they don't that, guess what the tariffs will, whether there's a deep filler lindo, your reaction to that it Does sound like the president's making these threats to try to get effect change? I i think that's absolutely right and at one point we've got to focus on maria about two weeks ago we got the flash report for first quarter gdp here in the united states.

Three point: two percent was much stronger than expected. We were at one point, eight percent, and when you dig into the numbers we got a hundred basis points of of gdp growth from a positive net trade numberthat is a glimpse into the future. This is exactly what trump has been looking for in terms of doing this entire china trade negotiation, because his view is that we could shrink that deficit with china and grow the economy, 1 % faster, so he's seen in a sense what the results could be he's Got to stick to the course here and and try to get a good negotiation and and get us economic growth higher based upon more equitable trade terms. You have to believe if the chinese do not follow through and do this meeting this week, gordon these sell off this elephant stocks can trace this worsen. Certainly because you know at this point, you knowthe chinese are going to maybe come to a deal, but we're talking months down the road, because this is you can't give into trump's pressure and see jinping as fragile as it is. This makes it much worse for him. The chinese deal, though, have has not been priced into earnings, lindsay. No, it's been priced into the market, but it's not necessarily ceos. You know when they gave guidance, they weren't, saying well. Part of this strength and optimism is, is as a result of what we're gon na get from an opening markets in china. In fact, coming into the year, they've been very conservative. They continue that with q1.

We have two point: six percent earnings - growthin 2019. That'S very well.

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