Investors are hopeful that commercial negotiations between the United States and China this weekend cool the trade war, dissipating part of the uncertainty that hangs over financial markets, although few expect a breakthrough right now.
The meeting in Switzerland that takes place between the two countries can mark one of the biggest events since US President Donald Trump launched comprehensive tariffs on April 2, which launched global trade in chaos and triggered extreme volatility in the markets.
“This is the mother of all negotiations,” said Alejo Czerwonko, Investment Director at Emerging Markets Americas at UBS. “There are hundreds of billions of dollars in trade at stake, a 145% rate on Chinese exports that is equivalent to a kind of actually embargo and complaints that go far beyond trade.”
Commercial negotiations between US and China representatives in Geneva, Switzerland, began on Saturday (10) and continue on Sunday (11).
Investors recently expressed optimism that the worst commercial scenarios would not materialize and pointed to signs of reduced tension between US and China as the reason behind the recovery of actions.
However, despite Trump’s comments before the negotiations, suggesting a lower level of tariffs to China, and Thursday’s trade agreement between US and UK, many market participants said they did not expect major advances this weekend.
Continues after advertising
Instead, they were limited to expecting nothing to go wrong when both sides were face to face to the first formal round of negotiations, which may last.
“We still doubt that direct negotiations between the US and China lead to a ‘big commitment,” said Thierry Wizman, a global exchange rate strategist and macquarie rates, in a statement to customers.
Both the US and China may want, or even need to reach an agreement, said Liqian Ren, director of Modern Alpha at Wisdomree Asset Management. At this early stage, however, there seems to be little incentive to reach a deal quickly, he added.
Continues after advertising
“Each one still wants to see how the other side deals with negative opposite winds,” Ren said.
“At this time, the market is perhaps a little too optimistic in terms of what China and the US can reach and the speed with which events will take place.”
Commercial tensions between the two countries increased last month, when the US increased tariffs on all Chinese imports to 145%. In reaction, China raised taxes on US imports to 125%.
