One good reason to be optimistic of US-China talks over the weekend

When Trump talks something up, you can bet that there’s always going to be exaggeration to the story. Not least with talks with China, we’ve already gotten a precedent for that back in 2019. This time around is no different of course as he said that both sides “had a very good meeting” over the weekend. However, the big difference this time is actually the response from the Chinese camp.

More often than not, you’ll see China refute claims by the US on how talks are progressing. Or even denying the fact that any talks were taking place, as they did in the weeks prior to this.

But now, both sides are expected to produce a joint statement – which is a rarity on its own – after talks in Switzerland. And China is sounding rather upbeat about the situation as well, which supports Trump’s narrative too.

The timing of the statement remains unclear but China is saying that: “If the dish is delicious, then the timing is not a matter.”

Adding that: “No matter when this statement is released, it’s going to be big news and good news for the world.”

With headlines like that, it is little wonder to see why risk trades are looking more exuberant to start the new week.

All that being said, the devil will still be in the details. Most reports are indicating that there is some form of agreement of sorts, but the Chinese state media has said that both sides have agreed to “establish an economic and trade consultation mechanism”. And that this will be the main platform as the US and China now move towards negotiating their positions.

In other words, the positive thing now is that both sides are showing keen interest to engage in further talks. However, there’s still some ways to go before expecting any grand deal or the likes of it.

In the meantime, we’ll have to see what this means on the existing 145% tariffs. Trump touted “a total reset” but it’s still not clear if that means in both sides’ intentions to negotiate or whether that applies to existing tariff levels as well.

My guess would be the joint statement should allude to some form of easing on tariffs as both sides seek to negotiate progress by a certain timeline. But again, whether or not there will be actual progress, remains to be seen.

Come what may, we might just get a repeat of the Phase One trade deal from Trump’s first term. And that was a complete failure to say the least. Six years down the road, and we’re still talking about further decoupling between both countries. Nothing’s changed.

This article was written by Justin Low at www.forexlive.com.