U.S. Markets close in 3 hrs 10 mins

This week in Trumponomics: 'Phase one' fizzles

Rick Newman
Senior Columnist

There’s an APB out in Washington, DC: The “phase one” trade deal with China has gone missing.

Trump announced this non-deal on October 11, and ever since, he’s been insisting a final agreement is just around the corner. No corner has ever been so far away. The Wall Street Journal reported this week that the two sides are stuck, for the usual reasons: Trump won’t repeal tariffs on Chinese imports, as China demands, and China won’t reform its economy as Trump demands. This has been the storyline since negotiations began roughly a year ago.

Trump repeatedly says a deal is “close,” but he also makes it sound like it’s no biggie if there is no deal. “If we don’t make a deal with China, I’ll just raise the tariffs higher,” he said on November 19. That’s desperation masquerading as nonchalance.

Markets have been remarkably patient with all this, rising with every rumor of a deal and applying no penalty for Trump misleading investors. The Trump-o-meter is less patient. Trump is talking big with nothing to show for it, which is why this week’s reading is FAILING, our second lowest.

Source: Yahoo Finance

A December 15 deadline will test the prospects for a deal. That’s when Trump said he will impose new, 15% tariffs on a big set of consumer products from China, including electronics such as smartphones and laptops. China’s economy is hurting and would hurt more under those tariffs, if they cut into Chinese production. But those tariffs would also raise the toll on Americans consumers and businesses who are paying the tariffs. U.S. economic growth has slowed to less than 1%, according to the New York Federal Reserve. To win reelection, Trump needs a robust economy to brag about, and that ain’t it.

Some analysts think a deal with China is still the most likely outcome. Research firm Sandhill Strategy argues that Trump will have to make a deal with China soon, to offset the bad news of likely impeachment and give him a win to brag about as he campaigns for reelection. “We think that impeachment politics will drive President Trump to reach a trade deal with China to give voters something tangible to coalesce around, and that a late-2019 deal would likely time well to correspond directly with timing of a House impeachment vote,” writes Sandhill analyst Stefanie Miller.

But China would have to go along, and China has demonstrated a habit of raising its demands late in negotiations, when the American side thinks things are settled. Even though the tariffs are hurting China, they may see Trump as increasingly weak, and decide to wait for a better deal from him later into the campaign season, as Trump’s tariffs take a larger bite out of voters in his own country.

Will there ever be a bigger, more comprehensive deal with China than whatever “phase one” entails? It seems doubtful. If it’s this hard plucking the lowest-hanging fruit, higher goals are probably out of reach. But Trump has the consolation prize of basking in his beloved tariffs.  

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.

Read more:

The Democrats’ 3 worst ideas

Why Elizabeth Warren is triggering billionaires

The biggest myth of the Trump economy

The staggering cost of Elizabeth Warren’s plans: $4.2 trillion per year

Why Democrats bomb with rural voters

4 problems with Andrew Yang’s free money drop

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.