By CCN: Dow Jones futures collapsed overnight and the DJIA looks set to open in the red after a former US diplomat delivered a damning assessment of Trump’s ongoing trade war.
Max Baucus, who acted as US ambassador to China until January 2017, said the odds of a trade deal being finalized before the next G20 meeting are 50-50. In an interview with CNBC, Baucus said we may not even see a deal inked before the 2020 election.
“I frankly wonder, it’s very possible that President Trump will strike a deal before 2020. That will especially happen if the stock market is going south because he likes a solid stock market.”
Dow traders come back down to reality
It’s been a volatile week so far on Wall Street. The Dow Jones Industrial Average (DJIA) plummeted 600 points on Monday as Trump unleashed yet another war-of-words on Twitter.
I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!
— Donald J. Trump (@realDonaldTrump) May 13, 2019
Traders mounted a strong comeback on Tuesday, adding 200 points as Trump hinted at a trade deal conclusion in “three or four weeks.” But reality is firmly setting in this morning as the Dow bleeds slowly back to Earth.
Trump’s trade deal is 50-50
Traders are likely weighing a strong warning from the former US-China diplomat Max Baucus. Baucus pegs the chance of the trade deal collapsing before the next G20 summit at 50 percent.
“So far, President Trump has been hot and cold — he says things are great one day, and then he blames China the other day, so that’s very hard to tell.”
Dow Rallies 300 Points But Fed Insider Reveals Ominous Warning https://t.co/COtuRJLqlz
— CCN.com (@CCNMarkets) May 14, 2019
He joins a host of critics in recent weeks that hold concerns over Trump’s position on China. Federal Reserve Bank of Boston President Eric Rosengren said yesterday the trade war may trigger a global meltdown.
“We do have to be concerned that if we have a more widespread issue with trade and particularly if financial markets react quite negatively to that, it could have the possibility to slow down global growth. It’s way too soon to be able to make that assessment.”
A desperate bid to save the stock market
Trump is now stuck in a difficult position. He must maintain the strong stock market performance which he knows will win him re-election votes. All the while making sure his trade deal with China doesn’t implode.
Yesterday, the president called on the Federal Reserve yet again to ease monetary policy. He said if the Fed ever “matched” China’s low interest rates it would be “game over.”
China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a “match,” it would be game over, we win! In any event, China wants a deal!
— Donald J. Trump (@realDonaldTrump) May 14, 2019
The president has repeatedly demanded lower interest rates from the Fed which he believes would send the Dow and S&P 500 beyond record highs.
“China wants a deal”
One thing Trump and Baucus both agree on is that China is open to a solution. As the diplomat explained:
“China wants to do business with the United States. China wants a deal, but China wants a deal that China can live with.”
China’s Communist Party confirmed its position with a provocative poster issued yesterday by the state newspaper. The poster read: “Negotiate, sure! Fight, anytime! Bully us, wishful thinking!”
