President Donald Trump's latest toll-whiplash could be an unpleasant holiday surprise for markets, with experts warning that we could see a repeat of last year's market route in December if the White House escalates its trade war in China after throwing last week's everything -but- insured "phase one" agreement at risk.
"There is no agreement at this time to remove any of the existing tariffs as a condition of the phase one agreement," White House trade adviser Peter Navarro said Thursday night on Fox News, a statement Trump repeated to journalists Friday in the White House.
“They would like a return. I haven't said yes to anything, "Trump said. "China would like to have something of a return, not a complete withdrawal because they know I will not."
China's state-run media expressed surprise at the rollback, according to Reuters, as Doug Barry, a spokesman, did. for the US-China Business Council.
“As of last Friday, our senior-level contacts in both governments were discussing venues for a presidential meeting to sign an agreement, so this latest asshole comes as a surprise. Hopefully there is a temporary setback, "he said.
This latest development is a sudden face from a week ago, when an agreement to remove some tariffs on both sides and Chinese purchases of US agricultural products seemed imminent. [1
Markets came up with the news, but the concern crept in later in the week, as both sides reportedly had not even reached where a signing ceremony was The White House pushed for a US location after the host country of Chile canceled the upcoming Asia-Pacific Economic Cooperation Conference – where Trump and Chinese leader Xi Jinping expected to formalize a trade weapon – because of protests.  The president's reliance on Twitter as a medium to drive politics puts US negotiators at a disadvantage, Barry said, noting, "Negotiation one about wrestling and resulting ping-ponging of jobs would be better done privately. "
Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics, said Trump may have oversold the likelihood of a favorable deal to place Wall Street , and now run the risk of being included in the previous statements.
"In some ways, he has already sold the deal in advance. To markets," he said – a dynamic he speculated in Beijing is seeking to exploit by pushing for more comprehensive tariff relief. "They want to roll as many tariffs as possible, and they feel he is politically and financially vulnerable, "he said.
While investors welcome the return of existing tariffs, their greater concern is about those who are still on the horizon. Investors who are already exposed to anemic business sentiment and a contracting industry sector, fears that this final tariff levy on a wide range of consumer goods, which is still scheduled to start on December 15, could hit the heart of consumer spending – one element that keeps the US economic momentum going at a sentimental pace
Trump could still push forward with December tariffs – despite his advisers telling him they would is at higher prices for American consumers – because he doesn't want to look weak.
"Chinese officials feel they have taken over in this round of negotiations because the United States has stayed away from implementing the December tariffs ever since they were announced," said Mark Williams, chief economist at Capital Economics. "There is still a risk that Trump will continue with the December tariffs despite his advisers telling him they will lead to higher prices for US consumers because he will not look weak," he said.
"They have learned that he can be bait, and they have learned that what he really cares about is that he is longer in the election season than he was a year ago, and he is vulnerable," Kirkegaard said. "The point is, the Chinese want to feel that Trump's advance announcement of the deal means he can't turn around and escalate," he said. "Markets have priced themselves under normalization, phase one – a truce."
If the opposite happens and expected ceasefire instead becomes an escalation, investors will be in a bumpy turn with potential for a repeat of last year as fears of the trade war market and slow global growth drove large indices to return profits for the entire 2018, with the S&P 500 and the Dow Jones Industrial Average, which each posted its worst annual performance since 2008.
"If they can facilitate such a marketing routine, they will likely feel that Trump will come back with what they want in January," Kirkegaard said. "This is coming to be a critical decision point for the administration and the president. "