Rabobank: There Is No Way China Is Either Willing Or Able To Stick To The Deal's Terms

Today we got a taste of things to come when White House China hawk Peter Navarro stated to the press that the US-China trade deal was “over”. Cue a plunge in stocks and in CNY and in bond yields and general risk off. Then cue the inevitable rapid winding-back of those comments from Navarro and Kudlow and Trump, with the former saying his comments had been taken “wildly out of context” (they hadn’t given he was talking about the total collapse of US trust in China) and the latter tweeting “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement.”

The problem is that this upbeat assessment is also wildly out of context. There appears no realistic way China is either willing or able to stick to the deal’s terms. Even Democrat Chuck Schumer has just retweeted Trump with a few amendments: “The China Trade Deal is fully intact. Hopefully they will continue start to live up to the terms of the ‘Agreement.’” Of course, at this stage Trump is desperate to maintain some semblance of a ‘win’. Yet if no US soybean sales are made in bulk soon could he then turn the trade bazooka on China – perhaps handily timed around the date of one of the planned Trump-Biden debates? Don’t rule it out.

China certainly isn’t doing much to help on a related front. It has just been announced that the controversial new Hong Kong national security law will not be made public in full until AFTER it has been passed in Beijing - within a week it appears. Suffice to say that the details revealed so far certainly tick all the boxes for other US China hawks, such as Secretary of State Pompeo.

Perhaps not only him. Yesterday’s virtual EU-China summit was summarised by the Global Times thus: “China, EU seeks to inject momentum in recovery”. The New York Times says: “Betraying Frustration with China, EU Leaders Press for Progress on Trade Talks”. The European angle, from DW, is “EU chiefs press China on trade, Hong Kong security law”, adding “Tensions have been rising…Top EU officials struck a tough tone during talks Monday, pressing China on its trade and investment relationship and warning of “very negative consequences” if it goes ahead with a proposed controversial security law for Hong Kong.” The EU also added that China needs to “redress” the trade relationship and “resolve concrete problems”.