Well, I guess I was wrong. I had thought the US-China trade deal was going to happen. It was always in the interest of the US, and I thought it was likely in China's interest as well. But I suppose asking China to change what had been a successful economic strategy for 40 years is asking too much.

There's of course still a chance that a deal can be reached. But if not, here's what I see will happen...

- Over the short term, the increased tariffs will largely be paid by the Chinese private sector. These factories really have nowhere else to sell their output, so their prices will go down. Some of it will be paid by US consumers, but not much. US companies (and other multinationals) that have established worldwide supply chains in China will suffer, as these factories are now stranded assets. There is a lot of this, so it is negative for the stock prices of these companies and thus the market as a whole.

- Longer term, supply chains will be relocated to other emerging Asia. So it's actually bullish for some assets in these countries, like real estate. Banks in places like Indonesia, Vietnam, etc. would also benefit. I want to stress that this is longer term stuff. Shorter term, assets in EM will suffer, with the risk of a blowup in highly stressed ones like Turkey or Argentina.

- The next trade domino will be the EU. Since that area is already in secular stagnation, this could have serious consequences. A lot of the EU stock market is auto-based, and this would be the main target. If the Germans allow a fiscal stimulus, this could be managed. Don't bet on it.

The most important trading advice I can give is not to trade on stuff you don't have a strong view about. I felt that the deal was going to go through, but I knew I didn't have any insight that the market didn't already know. So I did not trade it. If I had shorted bonds, like I was thinking about a few posts ago Long time no post..., I would already be out of pocket.