On Saturday evening, December 1 in Buenos Aries, Argentina, the Presidents of the United States and China dined together and discussed trade. At that meal, the world waited for news if the current environment of protectionism in the form of tariffs by the United States and retaliatory measures by China would come to an end or escalate from a trade dispute into a trade war between the counties with the leading GDPs.
Both sides sent mixed messages going into the meeting between Presidents Trump and Xi, but much of the rhetoric could have been positioning as they set the table for negotiations to avoid a conflict that could have significant ramifications when it comes to the health and overall wellbeing of the global economy over the coming months and years.
Henry Clay was a Senator in the 1800s, and his nickname embodied his legacy as he has gone down in history as the Great Compromiser. Clay believed that any great compromise needs to leave both sides of an issue feeling that they gave too much to achieve a solution. In other words, both sides need to leave a negotiating table, or in the case of the U.S. and China, a dinner table, unhappy with the result feeling as though they were losers
The dinner table in Argentina the place where President Trump used his Art of the Deal skills and where President Xi held onto many of the critical factors that have propelled China into an economic leadership role in the world. The perfect result for the two leaders is one where each could claim victory. For the U.S. President, any improvement of the playing field for trade with the world’s most populous nation would put a feather in his cap for the upcoming 2020 Presidential election. When it comes to President Xi, the ability to continue to access U.S. consumers and receive agricultural commodities from the world’s leading producer of corn and soybeans will sit well at home. Therefore, a trade deal built on compromise, in this case, could create an aura where both leaders emerged victorious giving new meaning to Henry Clay’s great compromise.
The dinner and meeting appear to have been a success. Presidents Trump and Xi announced a 90-pause on any new protectionist measures, and the two sides work diligently to finalize a deal on intellectual property, technology theft, and non-tariff trade barriers. The White House put out a statement that said:
“China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries," the statement continued, adding that "China has agreed to start purchasing agricultural product from our farmers immediately.”
If the two countries cannot reach an agreement within the three-month period, exiting 10 percent tariffs on $200 billion worth of Chinese exports to the United States will increase to 25 percent. However, it is likely that the news will provide support for the prices of many commodities that have been in the crosshairs of the tariffs most notably a grain market. Source: CQGAs the chart shows, a rally in the S&P 500 began to move higher on November 26. Stocks should receive a bullish boost as the sun could be breaking through the dark clouds of the trade dispute and the Santa Claus rally in the stock markets is likely to continue.