US-China relations and trade (with Yvonne Man, David English, Stephen Engle)

Ambassador Kurt Tong discusses the US-China relationship post-Trump-Xi summit, emphasizing the 'constructive stability' framework. He expects tariffs to be re-established at previous levels via Section 301, but sees room for negotiation on non-sensitive goods. He warns that a Trump phone call with Taiwan's president combined with an arms package would be highly disruptive. He is optimistic about the Board of Trade but sees the Board of Investment as more complicated.

Yields

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RUT

Oil

Metals

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The Asia Group 3.0
Management Consulting
Kurt Tong 7.5

US-China relations and trade (with Yvonne Man, David English, Stephen Engle)

dxy

Stable US-China relations and tariff understanding may reduce currency volatility, but no explicit dollar view.

ndx

Tong's discussion of stability and tariff re-pricing suggests no major disruption to tech trade, implying a sideways view for NDX.

Where do we stand in the US-China relationship after the Trump-Xi summit?

Yvonne Man
Kurt Tong

Significant progress. The 'constructive stability' rubric puts a floor under how bad the relationship can get. The basic framework is to continue improving the economic relationship.

Commercial deliverables were not overwhelming, but the framework was important.
How do we keep the relationship from going pear-shaped given tariff investigations and Taiwan comments?

Stephen Engle
Kurt Tong

On tariffs, the US and China have a rough understanding that Section 301 will re-establish previous tariff levels. That is priced in. On Taiwan, Trump operates outside the usual framework, but the basic US policy is still maintenance of the status quo. There is real risk of miscommunication.

The combination of a phone call and an arms package would be the most disruptive action.
What would happen if Trump takes a call from Taiwan's president and approves an arms package?

Stephen Engle
Kurt Tong

China would be very upset and believe the understanding was violated. It would lead to intense diplomatic dialogue, but likely get back on track for the September summit.
How sustainable is the 'silicon shield' (Taiwan's semiconductor manufacturing)?

Yvonne Man
Kurt Tong

Extraordinarily important. The economic cost of disrupting Taiwan's role is extraordinarily high for everyone. Trump understands how important Taiwan is.
How important is the Board of Trade?

Stephen Engle
Kurt Tong

It's a great idea. There are items China produces that the US wants and doesn't produce. Bringing tariffs down in a reciprocal fashion is acceptable to both sides. I'm quite optimistic.

It creates structure and improves communication.
What about a Board of Investment for Chinese capital in the US?

Yvonne Man
Kurt Tong

Much more complicated due to political suspicion. We might see pilot projects or specific areas of benefit. It's something to watch for by September.

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