Trade deal mood continues to sour as it becomes increasingly evident how big is imbalance between the will to concede and demands what creates classic catch-22 deadlock. Beijing asks Washington to cancel all tariffs, which the United States is ready to do only after substantial concessions, which Beijing is ready to do after the US cancels all tariffs. This stalemate is likely push the timing of the deal into the next year.

Last month, Trump and Mnuchin said negotiations and signing the deal could take five weeks. However, the announced deadlines have passed, but the deal not only remains elusive, but also becomes cluttered with new contradictions.

When asked by journalists in Texas about the status of the talks, Trump said that “I don’t think they can step up to the level which I want”. An unnamed Reuters source confirmed that Trump and Lighthizer are aware of the irreversibility of de-escalating the conflict, therefore, without significant concessions and progress on key aspects - espionage and protecting trade secrets, they do not intend to reduce tariff pressure.

Chinese Deputy Prime Minister Liu He said on Wednesday that his position on the deal is “cautious optimism.” According to him even though the United States makes “confusing” demands the deal will eventually be signed.

The Chinese side had previously suggested that Trump and Xi could sign an agreement in early December. Events in this short time period will determine the fate of December tariffs in the amount of $156 billion dollars, which will finally affect consumer goods. However, the response from consumer inflation will not be immediate - as I wrote earlier, the peak of imports of these goods for the New Year's consumer boom occurs in mid-October, which is why the date of the introduction of tariffs (December 15) was chosen so as to minimize the impact on importers:

1.jpg

The market again bids down the chances of successful outcome:

2.jpg

The key goal probably is not the interim deal itself but stopping December tariffs. However, there is another issue that contributes to rough going of the trade talks - Hong Kong protests. On Tuesday, the US Senate passed a bill condemning the crackdown on protests and pledged to support Hong Kong, which probably infuriated Beijing.

Chinese commentators also doubt about signing the deal. The “Voice of the Party”, editor of the Global Times Hu Xijin, said the camp of optimists is rapidly shrinking:

3-7.png

Accordingly, the rally in risky assets has so far hit the ceiling.

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. 72% and 71% 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.