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Trump optimistic on trade deal with China, prepares more tariffs

While the US downplays the recent tariffs, Theresa May will try to get MPs to vote on her Brexit deal for a fourth time, if she actually has one.

Trump optimistic on trade deal with China, prepares more tariffs

Donald Trump shared his optimism on Twitter saying the ongoing Sino-US trade war will have a positive outcome and the US will make a deal with China “when the time is right”. “It will all happen, and much faster than people think,” he added. Investors expect that the G20 summit in Japan on 28–29 June, where the US president is due to meet his Chinese counterpart Xi Jinping, will bring the trade war to an end.

Stock markets recovered from substantial losses on Monday, with the S&P 500 and Dow Jones posting gains of 0.8 per cent. The Dollar also gained against the Euro and the Pound, with EUR/USD retreating from its two-week highs back down to the 1.1200 barrier and GBP/USD falling far below the 1.3000 level.

Brexit

Meanwhile, a 10 Downing Street spokesperson announced that members of Parliament may be asked to vote on Theresa May’s Brexit withdrawal agreement again in early June, saying it was “imperative” if the UK was to leave the European Union before the parliamentary summer recess. Labour sources have said they will not back the bill without a cross-party deal, which suggests there is still much work to be done.

European data

Germany and the Eurozone today will release the latest growth data. The Eurozone cut its 2019 growth forecast from 1.3 per cent to 1.2 per cent last week, which echoes a second cut in forecast for Germany from 1.1 per cent to 0.5 per cent.

Europe’s largest economy, which has been caught in the Sino-US trade conflagration, contracted in the third quarter of 2018 and only just avoided recession in the fourth quarter. Washington and Beijing continued the tit-for-tat trade war, having levied further tariffs. This is likely to have put Germany on a shakier ground, particularly if Trump decides to turn his focus to the German car industry as he threatened in February. The outlook for the country is not very promising, especially as the automotive industry is still reeling from the diesel emissions scandal.

That said, GDP data for the first quarter of 2019 is forecast to paint a more positive picture, with growth predicted at 0.4 per cent compared to 0 in the last quarter of 2018. If Germany meets these expectations, it will improve the Eurozone’s outlook from 0.2 per cent to 0.4 per cent. The German release will definitely be the one to watch as until now if Germany caught a cold, the Eurozone caught flu.

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