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The 3 main outcomes of the Trump-Xi meeting at the G20 summit and how they will affect the markets
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Loading...President Donald Trump and Chinese President Xi Jinping are expected to meet at this week’s G-20 summit in Japan and the stakes for Wall Street are high.
The two leaders are expected to discuss the ongoing U.S. China trade war. Talks of a possible trade deal fell through back in May after the Trump administration hiked tariffs to 25% from 10% on about $200 billion worth of Chinese imports. China retaliated with higher tariffs of its own. President Donald Trump has also floated the idea of slapping tariffs on an additional $300 billion in Chinese imports.
Evercore ISI strategist Donald Straszheim said there are three potential outcomes from the Trump-Xi meeting: First, the U.S. agrees to hold off on slapping additional tariffs on Chinese goods for an indefinite amount of time. Second, the U.S. holds off on additional levies for a fixed amount of time. Third, the U.S. makes no mention of the additional tariffs in its post-meeting statement, which would suggest the administration will move forward with them “ASAP.”
Scenario 1: US holds off on additional China tariffs indefinitely, talks restart (45% probability)
The most likely scenario from the Trump-Xi meeting in Japan is that the U.S. agrees not to impose tariffs on the additional $300 billion in Chinese imports without a concrete timeframe, Straszheim said.
Scenario 2: US holds off on additional China tariffs for a fixed number of days, talks restart (35% probability)
There is a 35% chance of this outcome taking place and it would be the most favorable to Xi and the stock market as it would give them time to “breathe.” It would also give the market “certainty for more negotiation (and assessment) time.” But what makes this scenario unlikely is it would hamstring Trump in future negotiations.
Scenario 3: US and China make no mention of additional tariffs, suggesting they will be implemented soon (20% probability)
This is the worst-case scenario for both Xi and the market as it deals another body blow to the Chinese economy and increases fear among investors that the trade conflict will drag for longer.
Source: CNBC
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