Trump, China tariffs: trade war deal midterm election, stock market ploy

President Donald
Trump
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• President Donald Trump has suddenly suggested that the US and
  China could make a deal to end the trade war.
• But the suggestion flies in the face of recent actions by the
  administration — and Trump’s own words.
• Analysts said Trump could be simply trying to sooth investors
  and boost the stock market in the run up to the midterm elections
  by teasing a deal.

President Donald Trump teased a prospective trade deal with China
on Friday, but many analysts are skeptical the
trade war is going to end anytime soon.

Trump told reporters before leaving the White House that the US
is “close to doing something” with China to ease the ongoing
trade war between the two countries.

“I think we’ll make a deal with China,” Trump said.

The comments came after
a Bloomberg report that Trump instructed members of his
cabinet to draft a deal that would end the trade war with China
and lift the massive tariffs on the country’s goods coming into
the US.

The president also tweeted after a Thursday call with Chinese
President Xi Jinping of progress and said the two sides would
discuss trade issues at the upcoming G20 meeting at the end of
the month.

The possibility of progress
helped stocks rally overnight. But most economic and
trade analysts say it’s unlikely that any deal with China is on
the horizon.

Isaac Boltansky, a policy analyst at the research and trading
firm Compass Point, told Business Insider that the complexity of
the issues the US and China are discussing — intellectual
property rights, Chinese laws restricting how US companies can
operate in the country, and more — make a deal difficult.

“The issues driving the China-US trade tensions are
complicated and contentious, which makes it incredibly difficult
to believe that substantive progress was made during this phone
call,” Boltansky said.

The Trump administration has imposed tariffs on $250
billion worth of Chinese goods, and Trump has suggested that
tariffs could be coming for all other Chinese imports,
worth as much as $267 billion, not currently subject to
duties.

Given that
tariffs are generally inflationary and
bad for economic growth, investors have not been particularly
pleased with the idea of a drawn-out trade war — or the
possibility of more tariffs. So talking about ending the battle
could help Trump boost the market, which the president has made a
key barometer of his success.

Read more:
Trump’s trade war took a stunning bite out of the US economy, and
it’s the strongest evidence yet that he’s shooting himself in the
foot»

“We view the positive statements as political cover that
could lay the ground work for further tariffs if the G20 meeting
is not fruitful/timed for near-term market and political
benefit,” said Ed Mills, a policy analyst at Raymond James.
“Ultimately, actions speak louder than words and all of the
actions of the Administration indicate a continued fight, making
it harder for a near-term resolution.”

“This is pre-election hype designed to make the markets
happy; there is no imminent deal with China,” Greg Valliere, the
chief global strategist at Horizon Investments, told Business
Insider.

Giving credence to the idea that the thaw in relations may
be a short-term stunt are the actions of nearly every other part
of Trump’s administration. The Department of Justice in recent
weeks has indicted multiple Chinese firms for attempted
intellectual property theft, and Attorney General Jeff Sessions
announced an
initiative to curtail Chinese economic espionage.

Any possibility of a deal would also appear to be news to
Trump’s top economic adviser, Larry Kudlow, who told CNBC that no
deal was imminent during an interview on Friday.

“There’s no massive movement to deal with China,”
he said.

And Trump himself has repeatedly said the Chinese were “not
ready” to make a deal yet and none was likely in the near
future.

“They want to
make a deal so badly. And I said, ‘You’re not ready yet. No,
you’re not ready. No,'” Trump said at the White House on
October 26. “I told him, ‘You’re not ready yet.'”

Given the speed of Trump’s turnaround, Boltansky said he
also believed the sudden surge in Trump’s optimism was possibly a
political play.

“At best, the parties are negotiating about negotiating and
we are still miles from a deal,” Boltansky said. “At worst, this
was a maneuver to goose the market a few days before the
midterms.”