Dow Jones Industrial Average (DJIA) futures were flat in early trading Wednesday, pointing to a nervous stock market open. Trump’s ‘partial trade deal’ risks falling apart as China is reluctant to commit to $50 billion agricultural purchases. This shouldn’t come as a big surprise as…
Dow futures contracts struggled for traction before the bell on Wednesday as reports out of China dampened hopes for partial trade deal conclusion.
A key part of the ‘phase one’ deal, according to the Trump White House, is China’s commitment to purchasing $40-$50 billion of US farm products. But fresh reports this morning reveal a reluctance to buy such large quantities of American goods.
“China does not want to buy a lot of products that people here don’t need or to buy something at a time when it is not in demand” – Chinese state-owned company, speaking to Reuters.
DJIA futures contracts struggled to break into positive territory in the overnight session. Traders are in wait-and-see mode as trade war tensions persist and the Federal Reserve readies a third interest rate cut.
Despite Trump’s claim that a partial trade deal may be signed “ahead of schedule,” it’s clear that huge gulfs remain between US and China expectations.
“The deal I just made with China is, by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country. In fact, there is a question as to whether or not this much product can be produced? Our farmers will figure it out. Thank you China!”
But China never confirmed Trump’s $50 billion figure. As the Washington Post wrote at the time:
“Nothing was written on paper, and China’s Commerce Ministry would not confirm that figure Thursday, saying instead purchases would be made according to Chinese market needs.”
With US stocks markets at record highs, the Dow is pricing in a positive conclusion to the phase one trade deal. In other words, there’s little room for error. And, as CCN wrote yesterday, the November 17th signature still rests on four little words: “if everything goes smoothly.”
Still, none of this should come as a big surprise. Not only did China never confirm the large agricultural purchases, analysts sounded the alarm almost immediately. Referring to the $50 billion figure, Darin Friedrichs of Shanghai brokerage INTL FCStone said back in mid October:
“I think it’s a meaningless big number, thrown out to get headlines, and won’t happen.”
This article was edited by Samburaj Das.