It almost seems like the White House is trying to push stocks further into the red.
Barely two hours after all three US equity benchmarks turned red for the year, White House Trade Representative Robert Lightizer has released an update to a section 301 report in which he accuses China of pressing ahead with some of its more egregious trade abuses – specifically, IP theft – ignoring repeated warnings from the Trump Administration.
The update was made to a report initially released in March, before the administration moved forward with its tariffs on aluminum and steel.
Stock futures ticked lower on the headline.
The update clearly plays down the chances of any notable progress when President Trump meets with Chinese President Xi Jinping on the sidelines of the G-20 in Buenos Aires.
“This update shows that China has not fundamentally altered its unfair, unreasonable, and market-distorting practices that were the subject of the March 2018 report on our Section 301 investigation,” Lighthizer said.
Despite repeated U.S. engagement efforts and international admonishments of its trade technology transfer policies, China did not respond constructively and failed to take any substantive actions to address U.S. concerns.”
The US has reportedly been pushing China to agree to a general framework ahead of the informal G-20 summit. If no progress is made, it’s likely that the US will increase tariffs on Chinese goods and possibly introduce tariffs on the $200 billion+ Chinese imports that haven’t already been covered.
In another exercise in sending contradicting signals, economic advisor Larry Kudlow assured investors that talks with China were ongoing at “all levels”. Kudlow’s reassurances came after Vice President Mike Pence (once again) abused China over the weekend at APEC. When Pete Navarro warned Wall Street not to interfere as Trump would succeed in securing a deal with China “on his terms” because the US has more leverage. But Navarro was swiftly reprimanded by Kudlow and the White House.
The upshot of all this is that, while Kudlow and Treasury Secretary Steven Mnuchin have played good cop, Navarro, Lighthizer and Pence have played bad cop. Meanwhile, Trump has persistently played toward the middle, praising Chinese President Xi Jinping and repeatedly talking up the possibility of a deal – but warning that any deal must be in the US’s interest, and that China must end its predatory IP practices, cyberespionage and government support of industry (most notably tied to its Made in China 2025 initiative).
With all of these conflicting messages, China is probably having some trouble parsing where the administration stands. Even members of the Trump Administration are probably having trouble with this as well.
This confusion doesn’t bode well for any progress in Buenos Aires.
Read the full report below: