The end of the second quarter is just a day away. Usually we see lots of window dressing to close out a quarter but this quarter we are not seeing that.
Money managers have instead opted to sit on their hands because of the upcoming G20 meeting between President Trump and Dictator Xi. It makes sense that money managers do not want to make any big moves until the outcome of the meeting is known.
What this subdued window dressing at the end of the second quarter tells us is that the China trade war is increasingly mattering to investors in proportion to the number of items subject to tariffs and the rate of tariffs. The 25% tariff on $300 billion worth of Chinese imports really do matter to money managers and investors.
Huawei Matters To The Chinese
Another new revelation we have learned over the past 24 hours is that the technology ban against Huawei really does matter to the Chinese.
Just a month ago, the Chinese government and Huawei executives were saying that the U.S. ban on the sale of chips to Huawei really didn’t matter as Huawei was the biggest technology company on the planet and they could make their own chips are buy chips from other countries. The Chinese communists claimed to their own people and the rest of the world that Huawei can prosper without the U.S.; however, today the Chinese appear to have completely reversed their position.
China is now insisting that the U.S. lift its technology ban on Huawei as a condition of further trade negotiations. I guess the technology ban on Huawei really does matter after all.
President Trump isn’t going to remove the ban on Huawei. President Trump is probably not going to suspend 25% tariffs on another $300 billion worth of Chinese imports either. These measures were enacted because China walked away from negotiations or went back on previously agreed facets of the trade deal (i.e. it was over 90% done at one point). China is spending lots of money lobbying Democrats and paying corporate media to put pressure on the Trump Administration. China thought it could wait out the Trump presidency and buy off the next Democrat that gets elected. As far as we know, elements inside the Democrat and Republican parties may have even told the Chinese to stall because when they get back into power, they’ll drop the trade war issue completely. President Trump realized that was going on and ratcheted up tariffs in response.
I continue to see no evidence that a deal between the U.S. and China will happen at the G20 tomorrow.