A Big Deal

President Trump wants a deal with China. Not just any deal mind you, but a big, big deal. Not some little pip-squeak deal. Oil prices traded above $55 for the first time since November on a report of the biggest drop in OPEC oil production in 2 years, yet sold off hard after the President’s press conference where he said a deal with China could be postponed.

President Donald Trump said he wanted a “very big deal. This isn’t going to be a small deal with China. This is either going to be a very big deal, or it’s going to be a deal that we’ll just postpone for a little while.”

Traders took that to mean go big or go home and ran for the exits. They feared the potential impacts of more tariffs and bullish commodity funds feared giving back profits after January saw the best one-month oil rally since 2015. Because of that, the traders probably overreacted to the President’s comments because a bird in hand is better than one in the bush on the last trading day of the month. U.S. President Donald Trump said he would meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal.

The President does have a point. While we are complaining about the short-term impact on the markets and the economy, this is a historic opportunity to fix trade with China and one we might not get again. Tearing down trade barriers and stopping the theft of U.S. intellectual property will have positive benefits for the United States and China for generations to come. The only reason we could even have a chance to get to this point is because we have a president that has had the guts to call out China for their unfair trade practices and theft of U.S. intellectual property.

Oh sure, previous Presidents like Obama, Bush and Clinton complained about it but had little if any success doing anything about it. President Trump has a chance and from an economic point of view, he has the upper hand. There are more signs that China’s economy is hurting from the trade war. The Chinese Purchasing Managers' Index (PMI), came in at 49.5 for the month, up slightly from 49.4 in December, according to the National Bureau of Statistics (NBS). China's factory activity fell by the most in three years in January as slumping orders shows that the noose on China is tightening.

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Gary Anderson 2 months ago Contributor's comment

It is amazing that oil gets it, but the stock market is in a fog.