Just enjoy the show that is the US-China Phase One trade deal

Author: Justin Low | Category: News

The Phase One trade deal offers little in terms of any major progress between US-China relations as a whole


The details of the trade deal talk up a big game on Chinese purchases (at least the US version of things is), with just a general breakdown on how to reach the $200 billion.

I would expect the Chinese version of the deal - which has not been released - to reaffirm the purchase figures and stay more loose on its pledge towards other structural issues such as technology transfer and the yuan currency.

Then again, it is not like the commitments they made are anything drastic so we could end up seeing a similar language anyway. I mean, their pledge on the yuan currency is basically what they have been "promising" all along in its G20 commitment.

I reckon the enforcement mechanism is the more interesting one to digest as more likely than not, we'll be heading down this road. The hope is that things should start to unravel after the US election in November but who's to say that it wouldn't beforehand.

In the near-term, I still wouldn't rule out a sell-the-fact play once the market exhausts the optimism we're seeing at the moment. It may just be a quick correction/retracement due to fact that the "hook" i.e. Phase Two doesn't look like it is coming any time soon.

But for now, the market can look forward to a temporary respite and enjoy "the show".
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