What If China Trade Deal Fails?

Written by Swiss America

640px President Trump at the G20 48162296741How jittery investors would respond if Trump doesn't reach a trade deal with China -The Hill
"President Trump's off-the-cuff remark yesterday that a trade deal with China could be delayed until after the U.S. elections in 2020 spawned a large stock market sell-off. While markets have since recouped some of the losses amid hopes that a deal will be reached, the reaction to Trump’s statement raises the specter of what might happen if there is an impasse.

Previously, investors hoped an accord would be reached whereby China purchased more agricultural goods from the U.S. while the Trump administration rolled back some of the tariff hikes it had implemented. If not, the round of tariff hikes totaling $156 billion that were slated for December 15 would go into effect and virtually all imports from China, worth about $550 billion, would be subject to duties of 15 percent to 25 percent. Throughout the negotiating process, he has suggested that a deal is about to be consummated, only to pull the rug at the last moment. Investors have been caught off guard each time, because they believe it is rational for both sides to reach an agreement before economic damage is inflicted. But this is not how the president views the situation. He believes the U.S. has the upper hand in negotiations, because China depends on the U.S. as an export market and its domestic economy is slowing more than official statistics indicate....Thus far, the impact of tariff hikes has mainly been felt by U.S. manufacturers, farmers and businesses that have borne the brunt of the tariff hikes...But the latest round of hikes that were implemented this summer and which are scheduled for this month will mainly affect consumer goods....Should consumer confidence falter, it would likely be accompanied by stock market weakness."

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