• Weekly Market Report

Economic Week in Review

On Friday, U.S. and Chinese officials held separate press conferences announcing a “phase one” trade deal has been reached, although a number of details reportedly still need to be worked out. While the United States agreed to hold off on the planned December 15 tariff increases, CNBC reports “It’s still unclear how and when the U.S. will roll back other tariffs, a condition for a phase-one deal that the Chinese side has firmly maintained.
The Office of the U.S. Trade Representative said in a statement that the United States will keep 25% tariffs on about $250 billion of Chinese imports, along with 7.5% duties on roughly $120 billion of Chinese imports. Both sides also still need to sign the text of an agreement, which Chinese officials said requires legal review and translation. {USTR} Lighthizer said both countries hope to sign the deal in Washington in early January, and there would be no new tariffs as long as China negotiates in good faith.”


Macquarie Capital’s Larry Hu and Irene Wu don’t see the trade deal having much of an impact on Chinese growth in 2020: “We attribute the export slowdown this year to the slowing global economy instead of trade war. True, China’s export growth slowed to 0% yoy in 2019 from 10% in 2018. But the pace of slowdown is not very different from the previous two cycles in 2012 and 2015. It’s also not very different from the export slowdown in the rest of the world, which is not subject to tariff hikes like China. In our view, for trade war, the impact on market sentiment is much larger than the actual impact. Therefore, a trade deal could help on sentiment, but not much on the real economy. That’s why we don’t expect a meaningful pick-up in export growth in 2020. Instead, property would be the key swing factor in 2020.” Another key trade development last week was the announcement that the House leadership and Trump administration have reached an agreement on the new U.S.-Mexico-Canada Agreement on trade. This morning, the Commerce Department announced that USTR has delivered the USMCA implementing language to Congress, although the Financial Times reported over the weekend that Mexico is objecting to some of the new labor provisions: “A deal to implement the new North American free-trade pact, the USMCA, threatened to unravel after Mexico reacted angrily to details in the law to be debated in the US Congress this week. Mexico’s trade negotiator, Jesús Seade, flew to the US on Sunday for urgent talks over what he said was an attempt to sneak changes into the agreement by the back door, as concern mounted in Mexico that the government had made dangerous concessions to Washington.”

For those who may be interested, here are the USMCA agreement documents on the USTR website:

  1. Text of the Agreement: https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between
  2. Protocol of Amendment to the USMCA: https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/protocol-amendments
  3. Updated Fact Sheets: https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/fact-sheets

In other economic news last week, the Federal Reserve left rates unchanged last week, stating “The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.” As noted by the WSJ’s Daily Shot, “13 of the 17 FOMC members expect rates to remain unchanged in 2020. The median ‘dot plot’ has moved lower for both the 2020 and 2021 forecasts in each of the last five meetings.” The healthy jobs report for November, last week’s FOMC statement, and the announced preliminary U.S.-China trade deal have reportedly provided support for copper prices in New York:


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