We’ve all seen movies or videos where they employ a camera trick of moving the destination further and further away just as the subject approaches it. This is what the U.S./China Trade Negotiations now feel like. Two weeks ago, the talk was of where the agreement would be signed and whether it would involve a formal state visit of one of the 2 leaders to the other’s country or if a simple signing ceremony was enough. Now, the back and forth over whether a trade deal between the U.S. and China is imminent or even likely continues as this week President Trump mentioned tariffs and how they should remain in place until the U.S. is able to verify compliance with any agreed upon guidelines this new deal would impose on China.
Copper is the Key
American officials are now downplaying the chances of a breakthrough anytime soon. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for meetings at the end of next week, and Chinese Vice Premier Liu He is expected in Washington in April. The current goal is to reach an accord after Liu’s trip, though President Donald Trump has said he wants a deal that can be enforced, not one that’s quick. Given this uncertainty, copper has now started to roll over. China is the world's largest consumer of copper and the base metal is the clearest reading we have of the state of China's economy. Since bouncing off the lowest levels seen since June of 2017 and rallying for seven straight weeks, we have now fallen 3 of the last 4 weeks with this week close to breaking down form a sideways channel and extending lower. Make no mistake, if copper doesn’t hold support next week, the U.S. stock market won’t hold up either.