US-China trade: Reasons to expect a ‘great’ deal – Standard Chartered

David Mann, global chief economist at Standard Chartered, suggests that they see only positive news on US-China trade through the next 12 months.

Key Quotes

“Of all the factors that we can think of to help Donald Trump’s re-election prospects, avoiding a 2020 recession is high on the list. We assume that he would want a strong story to tell on the 2020 campaign trail about China, rather than being in the truce phase that currently prevails. This story could either be a ‘great deal’ or a worsening trade war that would risk weakening the economy further. We see more reasons for Trump to take the less risky option of a ‘great deal’.”

“Fiscal policy will barely support US growth in 2020, in our view. Monetary policy has already been loosening; we forecast another 25bps cut in December 2019. Trump’s main ‘direct controllable’ is trade policy. If a series of positive surprises on trade are delivered between now and the November 2020 elections, he could spin this as a ‘victory’ in the trade war – something that was a major component of Trump’s presidential campaign platform in 2016. A plausible scenario could be for a quid pro quo on tariff reductions in return for China to push the Chinese yuan (CNY) stronger, a reversal of what was seen since 2018.”