Home Stock Trading Strategies Did Chinese Misread Trump On Trade Deal? – Mike Swanson (05/09/2019)

Did Chinese Misread Trump On Trade Deal? – Mike Swanson (05/09/2019)

Days like today are days in which it is worth having a subscription to the Wall Street Journal, because they have a story this morning that says that the Chinese made a mistake with Trump and misread him on trade.

Remember last week when Trump was crying out for a rate cut from the Federal Reserve? Kudlow did it and even Mike Pence got into the rate cut act on CNBC Friday morning.

I just took this as part of the Trump news cycle show, but the Chinese have apparently taken these rate cut comments over the past few weeks as a sign that Trump is worried – even scared – about the US economy faltering and therefore could be pressured to make a show deal for the Chinese like he did with North Korea.

Here is one quote from the WSJ about what Chinese sources told them:

The hardened battle lines were prompted by Beijing’s decision to take a more aggressive stance in negotiations, according to the people following the talks. They said Beijing was emboldened by the perception that the U.S. was ready to compromise.

In particular, these people said, 
Mr. Trump’s hectoring of Federal Reserve Chairman Jerome Powell to cut interest rates was seen in Beijing as evidence that the president thought the U.S. economy was more fragile than he claimed.

An April 30 tweet, in which Mr. Trump coupled criticism of Mr. Powell with praise of Chinese economic policy, especially caught the eye of senior officials. “China is adding great stimulus to its economy while at the same time keeping interest rates low,” Mr. Trump tweeted. “Our Federal Reserve has incessantly lifted interest rates.”

“Why would you be constantly asking the Fed to lower rates if your economy is not turning weak,” said Mei Xinyu, an analyst at a think tank affiliated with China’s Commerce Ministry. If the U.S.’s resolve was weakening, the thinking in Beijing went, the U.S. would be more willing to cut a deal, even if Beijing hardened its positions.

I don’t think a deal is likely to be done today in time for the midnight tariff deadline.

CNBC commentators seem to talk as if they can’t believe the tariffs can go up and I keep hearing them saying they can go up for a day and come back down.

They are just afraid that a tariff war will make the stock market fall again like it did last Fall.

But it’s more likely to drop now like it did with the BREXIT vote in 2016 or the way it did last year in February with a quick 10% drop and big spike in the VIX.

I talked about that VIX spike scenario in a post yesterday you can read here.

Now if you don’t have a subscription to the Wall Street Journal I got a special deal for you. You can subscribe for just $1.00 by clicking this link here.