The positive thing is that he reaffirmed that the US is "going to be very nice to China". Adding to that is he's not going to "play hardball with president Xi" and that tariffs "will come down substantially". On tariff levels, it's a low benchmark considering we're at over 100% now and essentially trade is stifled between the two countries. But hey, at least Trump is trying to talk about progress.
He said that "ultimately, they (China) will have to make a deal" and that he thinks "they'll (China) want to be a part of the US". And that if no deal is struck, then he will just "set a deal" and "set a number" on tariffs.
For now, we'll have to wait on Beijing's response later in the day. However, it feels like Trump has this idea built up in his head and China continues to just sit and wait to see what comes next.
And that's the problem. There is just no consistency or any coherence in terms of his policy approach. That is the major issue that is plaguing US assets at the moment. It's a credibility issue.
And not just the one on trade/tariffs. With the Fed set to keep rates unchanged in two weeks' time, how will Trump respond to that? For some context, markets are pricing in a ~92% probability of the Fed leaving rates as they are on 7 May. Will he start bashing at Powell again? Will he suddenly threaten Powell's job security as he did before? That's a conceivable notion given his track record.
I won't rule out that any bounce or recovery in markets can look or feel bigly in times like these. After all, there is also money to be made in bear market rallies if you time it right:
But as mentioned before, with every day that US tariffs stay in place and the fight with China continues, it will just continue to erode the global economic outlook and confidence in risk sentiment. That is even if there are no other developments. I mean, give it a couple of weeks until the hard data comes. That's when reality will come knocking.
This article was written by Justin Low at www.forexlive.com. Read More Details
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