Dow futures perked up Wednesday, signaling a higher open after Treasury Secretary Steven Mnuchin said a trade deal between the U.S. and China was “90%” complete.
In an interview on CNBC, Mnuchin said he was hopeful President Donald Trump’s upcoming meeting with Chinese leader Xi Jinping would kick-start stalled talks. Though he declined to speculate on whether a trade deal would be reached by year’s end, Mnuchin said an agreement was “about 90 percent of the way there.”
“I think there’s a path to complete this.” he added.
The markets reacted accordingly, with the Dow Jones industrial average pointing to a 100 point gain at open.
Trump and Xi will meet at the Group of 20 summit in Osaka, Japan, this weekend – their first face-to-face since the G-20 meeting in Argentina in late 2018, where they agreed to pursue a trade deal. At one point in May, negotiations were “95 percent complete” by Trump’s estimation, but talks frayed and froze after the U.S. accused China of going back on prior commitments.
But on CNBC, Mnuchin said that Trump and Xi have a “very close working relationship” and that he was hopeful for a fair outcome for both nations.
“The message we want to hear is that they want to come back to the table and continue because I think there is a good outcome for their economy and the U.S. economy to get balanced trade and to continue to build on this relationship.” he said.
The stalled trade talks gave way to escalating tariffs between China and the U.S., prompting fears of a global slowdown as two of the world’s most powerful economic engines were stalled by trade conflict. In a G-20 briefing note, Christine Lagarde, managing director of the International Monetary Fund, warned that the last round of proposed tariffs against China could erase $455 billion in global gross domestic product in 2020.
“There is strong evidence that the United States, China and the world economy are the losers from the current trade tensions,” she wrote.
The formidable head winds from the trade war have challenged the Federal Reserve as it tries to evaluate the need for a possible rate cut. Although meetings last week concluded without an announcement of a cut, the central bank foreshadowed a rate cut in July to stabilize the economy amid trade tensions, spurring investor confidence and lifting markets. But yesterday, Fed chairman Jerome H. Powell said the central bank was still grappling with whether to move forward with a cut.
“The Fed is insulated from short-term political pressures -what is often referred to as our ‘independence,” Powell said at a Council on Foreign relations event in New York. “The question my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation.”
Powell’s comments sent markets down, with the Dow closing down nearly 180 points.
(c) 2019, The Washington Post · Taylor Telford