Trade deal with China will have to wait till Nov. 2020

The U.S.-China trade war is likely to drag till at least the U.S. presidential election in November 2020.

“I have no deadline, no,” said Trump to reporters in London, where he was due to attend a meeting of NATO leaders. “In some ways, I like the idea of waiting until after the election for the China deal. But they want to make a deal now, and we’ll see whether or not the deal’s going to be right; it’s got to be right.”

Trump’s remarks sent stock prices tumbling and triggered a rush into safe assets such as U.S. Treasury bonds. Following his remark, MSCI’s measure of global stock performance slid by 0.9% while the U.S. benchmark S&P 500 Index sank by 1.22% – its largest fall in nearly two months.

“I think it’s also important that the president make clear: he’s under no time pressure to get it done. Because otherwise there’s a tendency of the other side to say ‘Oh, he needs it for political reasons, so we’ll give him a worse deal than we would.’ He’s not going to play that game.”

Seema Shah, chief strategist at Principal Global Investors, had a different take on Trump’s move. Trump cannot afford a sharp fall in the stock market as it happened in late 2018 when he raised the temperature of the trade stand-off.

“The Chinese government believes that President Trump is desperate for a deal before the end of the year, when the race for the presidential election will really heat up,” said Shah. “Trump’s latest comments are a ploy to regain the upper hand in these negotiations.”

While Chinese Chinese President Xi Jinping and Trump had planned to meet and sign a Phase One trade deal at an Asia-Pacific leaders’ summit in Chile during mid-November, but the summit was canceled because of violent anti-government protests in Santiago.

Earlier in September, Trump had said he does not need a trade deal before the 2020 election in a move that applied further pressure on Beijing.

“The China trade deal is dependent on one thing – do I want to make it, because we are doing very well with China right now, and we can do even better with a flick of a pen,” he said. “And China is paying for it, and China is having by far the worst year that they have had in 57 years. So we’ll see what happens.”

In October, China reported its slowest economic growth in 27 years.

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