Weekend Update 02/12/2018 G-20 Winners and Losers Edition.

Baltic Dry Index 1231 -50   Brent Crude 59.46

“If you're not gonna pull the trigger, don't point the gun.”

James Baker. United States Secretary of the Treasury under President Ronald Reagan, and U.S. Secretary of State and White House Chief of Staff under President George H. W. Bush.

 

The biggest winner is clearly China. For all his huffing and puffing, it was “trade war” team Trump, that buckled and deferred their punitive tariff increase to 25 percent by 90 days. In return, Trump got a Chinese promise to purchase more goods from America and the promise of serious trade talks next year, both things China has offered since high summer.

The next biggest winner wasn’t actually attending the G-20 gathering in Argentina, the US consumer. They get at least 90 days relief from punitive inflationary tariffs on Chinese imports. 120 days if you count in December.

The next biggest winners were everyone else in the world. They get a 120 day break to try to persuade all the leading players to try to negotiate an end to the tariff wars before irreparable damage is done to the global economy. Prime Minister Trudeau was a big winner too, President Trump never insulted him once.

The “losers” although that’s not quite the right word, are those US retailers like Walmart, who probably brought forwards Chinese imports to beat much of the effects of the January tariff increases, though it isn’t going to hurt them in the long run.

For the rest of the G-20 attendees, it was just another G-20 gathering full of pious aspirations. Canada, Mexico and the USA all signed up to their new trade treaty, intended to replace NAFTA, if their respective legislators all agree. Since it’s hardly different from NAFTA, it’s hard to see them not agreeing next year.

Below, and then everyone was released to go home.

The quickest way of ending a war is to lose it.

George Orwell.

U.S. to delay China tariffs after Trump-Xi dinner meeting at G-20 in Buenos Aires

By Lingling Wei, Bob Davis, and Alex Leary

Published: Dec 1, 2018 11:10 p.m. ET

BUENOS AIRES — The U.S. and China said they would launch negotiations to ease trade tensions, with the U.S. postponing plans to increase tariffs on $200 billion in Chinese goods.

Under the plan, the two sides would discuss forced technology transfer, intellectual-property protection, nontariff barriers, cyberintrusions and cybertheft, services and agriculture. Should the talks fail, the White House said, the tariffs on the $200 billion of goods would increase to 25% from the current 10%. The tariffs were set to increase to that level on Jan. 1.

China also agreed to purchase a “very substantial” amount of agricultural, energy and industrial goods from the U.S., the White House said. Additionally, according to the White House, Chinese President Xi Jinping said he would consider again the previously unapproved merger between Qualcomm Inc. QCOM, +0.26% and NXP Semiconductors NV NXPI, +0.55% should the deal be presented. The deal fell apart earlier this year after Beijing failed to approve the merger.

Xi and Trump reached the trade cease-fire during a meeting Saturday, on the sidelines of a meeting of the Group of 20 industrial nations. Describing the talks between Trump and Xi as “friendly and candid,” Wang Yi, China’s foreign minister, said at a briefing that the two leaders reached “important consensus” that could help improve the overall bilateral relationship.

More

https://www.marketwatch.com/story/us-to-delay-china-tariffs-after-trump-xi-dinner-meeting-at-g-20-in-buenos-aires-2018-12-01

G-20 Leaders Give Nod to Trump in Watered-Down Trade Language

By Raymond Colitt, Josh Wingrove, and Jennifer Epstein

1 December 2018, 17:41 GMT Updated on 2 December 2018, 02:18 GMT

Leaders of the world’s largest economies agreed the global system of rules that’s underpinned trade for decades is flawed, in a post-summit statement Saturday that the White House quickly claimed as a win for Donald Trump’s protectionist agenda.

The Group of 20 communique was the culmination of days of round-the-clock talks. Some officials said just having a statement was a good result, given intense wrangling over issues like trade, migration and climate. Still, the watered-down language suggests further tests ahead for advocates of globalization and institutions like the World Trade Organization.

The statement issued at the end of the two-day meeting in Buenos Aires, Argentina, omitted for the first time a reference to the risk of protectionism. While leaders recognized the benefits of multilateral trade, they said the system is “falling short of its objectives and there is room for improvement." They committed to reform the WTO, the main global body for trade regulations, and will discuss that at their next meeting in June in Japan.

A senior White House official praised the document, particularly the language calling for changes to the WTO and global trade. The addition of wording to explain Trump’s decision to exit the Paris climate accord was also welcomed by the U.S., the official said. While the communique said signatories to the accord reaffirmed it as irreversible, there was a separate line included underneath on the U.S. position.

----Host Mauricio Macri from Argentina said reform of the WTO was needed for "fair trade, fair play" -- language often used by Trump. Still, not everyone saw the agreement as a win for Washington, and officials from non-U.S. countries set out to sell it after its release.

"From my point of view it’s a victory for multilateralism," said Marcello Estevao, Brazil’s deputy finance minister.

Russian sherpa Svetlana Lukash said the communique was a "great success" and showed five days of drafting had not been wasted. The summit had been "saved," she added. "Just getting the communique was a success."

The lack of a reference to the risks of protectionism was unsurprising given many G-20 members have been increasing their barriers to trade, said a senior official involved in the discussions. Negotiators from China and Europe had also pushed for language in the communique on the need for WTO reform, so it was not a victory just for the U.S., the official added.

More

https://www.bloomberg.com/news/articles/2018-12-01/g-20-statement-omits-mention-of-protectionism-cites-reform-need?srnd=premium

A relief rally for stocks would now seem the most probable end to the year, but this December is full of tricky hurdles to cross, starting later this week. Unless it gets postponed for President Bush’s state funeral, Fed Chairman Powell testifies to Congress this week. Then OPEC meets on December 6-7.

The GB Parliament votes on Mrs May’s Brexit exit on the 11^th, followed by an EU summit and ECB meeting on the 13^th. The ECB is supposed to start winding down its bond support rigs.

Finally, the Fed meets on the 19^th. Will they kowtow to President Trump and delay their long signalled rate increase, or will they assert their independence and raise their key interest rate by another quarter of one percent? My guess is they raise if only to preserve their international credibility, but you never know what leverage the President and his gang hold over them.

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith

The monthly Coppock Indicators finished November.

DJIA: 25,538 +157 Down. NASDAQ: 7,331 +205 Down. SP500: 2,760 +129 Down. 

Though a strong attempt was made of Friday to dress up the month-end figures to prevent November becoming a second down month in a row, the Coppock Indicators still moved down suggesting that there’s still more of the correction to come. But was the month-end dress up enough to prevent a massive wave of year-end stock fund redemptions? Probably after Presidents Trump and Xi found a way to defer by 90 days the January 1st increase in US tariffs. But beware the end of March 2019 redemptions if the US – China trade talks fail.