Wall St tumbles, Trump waiting for ‘right deal’

New York | US stocks extended declines after President Donald Trump signalled he was willing to wait, perhaps for another year or longer, for the “right deal” with China.

In London where he is attending the NATO summit, Mr Trump said he was open to waiting until after the 2020 elections to reach a trade deal with China.

“I have to make the right deal,” the President said. “We’ll see what happens. We are at a critical stage. They (China) called us today and they called us yesterday.

Mr Trump signalled a shift to a harder line in trade talks with China. AP

“They want to make a deal, we’ll see what happens,” Mr Trump also said.

Shortly after midday in New York on Tuesday (Wednesday AEDT), paring some earlier losses, the Dow was 373 points or 1.3 per cent lower, while the Nasdaq fell 1 per cent. The S&P 500 was 1.1 per cent lower.

ASX futures were down 67 points near 4.30am AEDT, paring earlier losses of more than 100 points. The Australian dollar was up 0.3 per cent to US68.39¢.

“Equity markets around the world got very extended, and now we’re seeing downside mean reversion within long-term uptrends,” Bespoke Investment Group said in a tweet.

The yield on the US 10-year government note dropped 12 basis points to 1.70 per cent.

Earlier, US Commerce Secretary Wilbur Ross told CNBC that US tariffs on Chinese imports due December 15 would be imposed unless there was substantive progress in trade talks.

“The President’s objective always has been to get the right deal, independently of when or anything else like that. So his objectives haven’t changed. And if we don’t have a deal he’s perfectly happy to continue with the tariffs,” Mr Ross said. “So he feels we’re in a pretty good position one way or another.”

Mr Ross also said he expects staff-level talks with China to continue but there are no high-level meetings scheduled.

In a note, Capital Economics’ Jonas Goltermann said Mr Trump’s latest comments signal “that he is shifting back towards a harder stance on trade” and that could be bad news for US equities in particular.

“It is difficult to say why Trump is toughening his trade rhetoric now. It may simply be aimed at securing concessions from China in the ongoing negotiations.

“Or he may be trying to shore up political support at home amid impeachment hearings in Congress, and ahead of what is likely to be a gruelling election campaign next year,” Mr Goltermann said.

“A tough stance on trade was a key plank of Trump’s 2016 campaign, and he may well think that continued aggression on that front will help his re-election bid,” Mr Goltermann also said.

“Either way, it appears likely that US trade protectionism will remain a key concern for investors over coming months,” Mr Goltermann said. “This suggests that US equities may continue to fare better than those elsewhere, which represents a key risk to our expectation that their long-running outperformance will end.”

A Washington-based source briefed on the talks said that the US side is willing to remove some tariffs, but wants additional concessions from Beijing to curb the forced transfer of American technology to Chinese firms.

While the deal being discussed includes new protections for trademarks, copyrights and other intellectual property, trade sources have said it would leave the most difficult technology transfer issues to future talks.

Trade experts say the most likely tariffs to be removed would be 15 per cent duties imposed on September 1 on about $US125 billion of Chinese consumer goods, including smart speakers, Bluetooth headphones, television sets and footwear.

But Trump’s most recent trade actions may leave Chinese officials concerned about whether he would uphold an initial deal.

On Monday, he said he would hit Brazil and Argentina with trade tariffs for “massive devaluation of their currencies”.

Seema Shah, chief strategist at Principal Global Investors, said Trump could not afford a repeat of the stock market’s sharp falls in late 2018, when he raised the temperature of the trade stand-off.

“The Chinese government believes that President Trump is desperate for a deal before the end of the year, when the race for the presidential election will really heat up,” Shah said.

“Trump’s latest comments are a ploy to regain the upper hand in these negotiations.”

With Reuters, The Washington Post

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