Trade Talks Cancelled
Fears over the health of the US/China trade negotiations have resurfaced this week. Negotiating teams from the two nations were scheduled to meet this week for a six-month review of the phase one trade deal signed earlier this year. However, president Trump announced that he has cancelled the meeting.
Speaking at a campaign rally in Arizona, Trump told supporters “I cancelled talks with China, I don’t want to talk to China right now.” Trump reportedly made the decision in protest against China’s handling of the COVID-19 virus, saying: “what China did to the world was unthinkable”. When asked whether the US could pull out of trade negotiations entirely, Trump said: ‘We’ll see what happens”.
Campaign Angle For Trump
Trump’s criticism and accusations against China over its role in the outbreak of the virus have become steadily more aggressive over recent months and, with the US death toll on the rise again, Trump appears keen to paint China as the enemy once again. Political commentators have suggested that this message is likely to be a key theme of Trump’s campaign for re-election and it certainly looks to be the case so far.
Chinese vice premier Liu He had been due to hold a video call with Treasury Secretary Steve Mnuchin and US Trade Representative Robert Lighthizer. However, the digital meeting has now been cancelled and no further events have been scheduled. Commenting on the situation, Chinese foreign ministry spokesman Zhao lijian said that details regarding the talks would be released “in due course”.
US/China Tensions Increase
Relations between the US and China have become increasingly fraught. Amidst the standoff over US accusations against China regarding the COVID-19 pandemic, the two nations have also clashed over the recently imposed Chinese security law in Hong Kong. The US announced that it will no longer recognise the region as semi-autonomous state and has also announced a ban on Chinese 5G networks in the US as well as a ban on the use of Chinese app TikTok, with Trump also warning that further Chinese tech companies could be banned from the US on security grounds.
For now, markets appear to be shrugging off the news. However, if there is a further escalation of tensions or should reports emerge suggesting that the trade deal will be scrapped altogether, this could be highly damaging for risk assets.
S&P500 (Bullish above 3226.50)
From a technical viewpoint. The S&P continues to put pressure on the 3391.75 level. Price has been grinding slowly higher over recent sessions, supported by the rising trend line from year to date lows and is now retesting the 2020 highs. To the downside, any correction lower will turn attention to the 3226.50 support.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 76% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.