That was what US trade rep Robert Lighthizer had to say in regards to the trade deal. Sparking hopes that the US and China may have (finally) resolved their differences.
Well…at least some of them.
This ‘phase one’ deal will see China buy up to US$200 billion worth of American goods. And in exchange, the US will put a stop to US$160 billion worth of tariffs on Chinese imports.
Those are just the headline terms of the agreement. There are a few extra bits and pieces that should also help grease the wheels of trade between the two nations.
Critically though, some barriers will still exist. Some US$210 billion worth of goods will still be subject to Trump’s tariffs. Hence, why this is dubbed phase one and not a complete solution.
Both sides will still be keeping some ammo in their back pocket.
Stock markets around the world still obliged though. They’ve roared higher as it appears a deal is finally, actually happening.
The ASX was no exception. Our local market was pushing new, record highs yesterday. No doubt abetted by Boris Johnson’s landslide win too.
It has been a good week all around for investors of all ilks.
So, will the good times keep on rolling into 2020?
The re-election playbook
Come next year, few (if any) events will be bigger than the US election. And I’m not talking about the eventual winner.
No, in my opinion, the eventual result will be overshadowed by the build-up.
See everyone expects Trump to pull out all the stops for his re-election bid. Building an irrefutable case for a second term.
So, I would count on seeing a roaring stock market as we get closer to the election.
After all, Trump loves to use stocks as his barometer for economic performance.
Perhaps this is when phase two or three will come into the picture. Deals that may ease the tension between China and the US even further.
Don’t get me wrong though, I expect Trump will still be tough on China. He’s not going to rollover for them. That would go against his whole reason for starting the spat.
Trump still has to be seen as the boss, even if it carries no real meaning.
That is what the past three years have been all about. Trump, the representative of the American people, wants to be in charge. He wants the US in charge.
The whole US versus China story is just a part of this much broader goal. A goal that will ensure the US stays on top of the global pecking order.
However, one problem still stands in Trump’s way. A thorn that has been stuck in his side since he took office…
The World Trade Organisation.
Trump’s hit list
If you’ve been following the Trump story closely, then his dislike of the WTO will be clear to you.
At every turn he has made moves to try to undermine their rule. His tariffs and protectionist policies (not just with China) have made a mockery of the WTO.
Truth be told, he has exposed just how weak the system is. Proving that they have no power to stop him.
Last week, Trump’s latest move buried the entire appeals process for the WTO. A system that many people have never even heard of, let alone understand what they do. Here is how Foreign Policy surmised it:
‘The specific battle between the United States and the other members of the WTO centers on the seven judges of the Appellate Body, who ultimately decide appeals on trade complaints between nations.
‘At least three judges are needed to hear an appeal. But with the Trump administration systematically blocking the naming of any new judges since it took office, no new justices have replaced those whose terms expired.
‘On Wednesday [11 December], barring an unlikely eleventh-hour breakthrough, two of the last three judges will leave, and the Appeallate Body will be down to one. Soon after, the wheels of trade justice will grind to a halt, with essentially no way to ultimately resolve big trade disputes like the yearslong battle between Airbus and Boeing.’
There was no eleventh-hour breakthrough.
The appeal process at the WTO is dead.
That means trade disputes have no arbiter for resolution. No means to seek a fair and reasonable outcome.
For the first time in a long time, global trade has become lawless. Or at least, laws will be unenforceable. And that is bound to shake things up in 2020.
Tune in tomorrow when I go over how the demise of the WTO could affect you and the market at large.
Editor, Money Morning
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