Despite the apparent escalation, Trump eased tensions somewhat by confirming he will meet with Chinese President Xi at the upcoming G20 meeting in June. This provided some relief as it was their meeting last December which delayed previously planned tariffs and got negotiations back on track.
Trump is under pressure to deliver ahead of next year’s presidential elections and with China trade talks stalling, he is certainly upping the ante. However, he appears mindful that tariffs will ultimately weigh on consumers and businesses, as later in the week he postponed automobile tariffs scheduled to be implemented tomorrow (18/05/2019) and scrapped tariffs on Canadian and Mexican aluminium and steel.
Chinese data disappointed this week as industrial output, retail sales and investment all slowed more than was forecast. The impact of US tariffs will not be reflected in economic data for a number of weeks; however, with data already softening, it is highly likely that China will react to support the economy with further easing of monetary and fiscal policy.
In the UK, cross party Brexit talks reached an impasse as the government announced it would hold another vote on the withdrawal bill early in June. After the vote, Theresa May has agreed to set a timetable for her departure as Prime Minister, that resulted in a number of MPs announcing they intend to run for Conservative Party leader. With Labour unwilling to support the withdrawal agreement without significant changes and a leadership battle building, it is unlikely the vote will be successful and the future of Brexit will likely fall to May’s successor, however, negotiations are likely to take a back seat during campaigning.
Next week, the Indian elections finally conclude, European parliament elections take place across Europe, the Fed releases minutes from its latest meeting, the ECB publishes its account of the April monetary policy decision and Mark Carney, Governor of the Bank of England, testifies to Parliament on the May inflation report. Data releases include UK inflation and Japanese GDP and trade figures.
Peter Quayle, Fund Manager