- The stock market reaction to every piece of U.S.-China trade deal news is ludicrous.
- Phase one of the trade deal does nothing to address the underlying issues of the trade war.
- Even more significant obstacles than those that started the trade war are on the horizon.
Talk of a U.S.-China trade deal has sent the markets into a land of panic and exaltation. The on-again, off-again nature of the trade deal has the market caught in a yo-yo where the slightest hint of good news sends stocks surging, and any mention of lousy news ignites a panic.
— Reuters U.S. News (@ReutersUS) November 20, 2019
As CCN.com’s Sam Bourgi has reported previously,
Stocks have rallied under the assumption that a trade deal is coming.
This latest stock rally comes just a day after the Dow Jones fell more than 150 points on Wednesday after the U.S. Senate approved a pro-Hong Kong bill.
Loads of people are getting rich in the short term off this constant yo-yo, “buy the rumor, sell the news,” but in no way does this tit for tat trade war between lend itself to long-term stability.
Underlying U.S.-China Trade Deal Issues
The biggest problem with the current trade deal speculation is that it does nothing to address the underlying issues that sparked the trade war in the first place. Stephen Roach, a senior lecturer at Yale University’s Jackson Institute, has echoed this sentiment:
(The deal) is a ridiculous effort to fix a trade problem, and it doesn’t address any of the structural issues that the US was so adamant about in launching the tariffs over a year-and-a-half ago.
One of the more important underlying issues perpetuating the trade war is the Chinese theft of intellectual property.
Keith B. Alexander, former director of the National Security Agency, has said it is:
The greatest transfer of wealth in history.
Lips have been tight regarding the exact details for the trade deal’s first phase, but all signs point to it not addressing the intellectual property crisis.
Conventional thought assumes phase one of the trade deal is primarily a farce designed to prop up the stock market. It would also give Trump a much needed political win before the contentious 2020 U.S. presidential elections.
Roach has also noted this, saying:
It’s politically expedient, especially for the U.S. President, who’s feeling a lot of political pressures for other reasons at home.
More Significant Obstacles Ahead
Besides phase one of the trade deal failing to address the most critical issues, other concerns are soon to present even more significant obstacles.
A recent New York Times article revealed China’s barbarous treatment of its Muslim minority population. Furthermore, regarding the Hong Kong bill mentioned at the beginning of the article, there is not a single known universe where this bill does not massively enrage the Chinese. Whether it derails phase one of the trade deal, if not U.S.-Chinese relations entirely, remains to be seen.