We’re Not Buying Trump’s Aggressive China Trade Deal Timetable

In today’s Daily Rundown video, we shared that we should expect to see President Trump tout would-be progress and trade deals this week given his horrible approval ratings, but even we didn’t expect him to comment that he expects a trade deal with China in three to four weeks. What casts more than some doubt on this is that the Senate has yet to confirm an ambassador to China; Trump has not appointed anyone else to lead talks with Beijing; and the White House isn’t reaching out to the Chinese embassy to begin discussions.

This strongly suggests to us that any meaningful outreach on trade talks is nil and the odds of a near-term solution low. It also indicates that Trump is looking to negotiate directly with China’s Xi Jinping. While that could be the path we eventually wind up on, in the past we’ve typically seen other envoys lay the groundwork for such conversations. That’s another reason to think any meaningful trade deal between the U.S. and China isn’t likely to be inked in just a few weeks.

To that, we can add reports that China is warning countries against striking deals with the U.S. that could hurt Beijing’s interests as they get ready for trade talks with the U.S. Reports indicate some of Trump’s advisers have been discussing asking other nations to impose so-called secondary tariffs on imports from certain countries with close China ties.

Putting all the above together, we believe the road to trade deals won’t be a short one and that we should not expect any great strides during the March-quarter earnings season. That reaffirms our thinking the tariff overhang will lead management teams to take a more conservative course with their forward guidance, keeping the market restrained as investors re-assess EPS growth prospects. We’ll continue to pick our spots with the TheStreet Pro Portfolio, but barring any radical trade or monetary policy developments, odds are we’ll remain on the sidelines near-term.

We’ll also keep our eyes on the brewing feud between Trump and Fed Chair Powell, and arguments over the Fed’s independence. Based on what we’ve seen thus far, it seems there is more bark than bite to Trump’s comments, but here too we’ll see what develops and reposition the portfolio as needed.