Trump-Xi: another 16 months of sudden stock market volatility?

News from Washington and Beijing on trade talks between the Trump and Xi administrations is not good, unless unforeseen development. After China’s announcement on August 23 of new tariffs on about $75 billion of U.S. imports, Donald Trump thought about doubling U.S. tariffs before finally opting for just a 5% increase on about $550 billion in Chinese products.

While stock market expectations of an impending trade deal were unfounded and did not materialize, negotiations appear at a standstill as Donald Trump believes his counterpart Xi is betting on the 2020 presidential election to continue to “ripoff” $600 billion a year. In the meantime, warns Trump, “16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot”.

In Beijing where U.S. statements about Huawei, Hong Kong and Xinjiang irritate many officials, the Chinese authorities prefer to work “on the long term” on the basis of a political system in which the Communist Party’s delegates appoint the president. This is indeed a political and structural difference between the two countries that weighs heavily in the course of the ongoing trade talks.