A Path To War? China Cancels US Trade Talks As ‘Skirmish’ Escalates

Following a surge in Chinese, European, and much of the US equity markets this week amid hopes that the so-called ‘trade skirmish’ was less ‘war-like’ than expected, China just dropped an early Saturday morning (local time) tape bomb that is sure to resurrect ‘trade war’ talk.

After President Trump slapped a fresh round of tariffs on Chinese goods, targeting 10 percent duties on $200 billion of goods; the two camps were scheduled to meet in order to dial back tensions. As we noted earlier in the week, China had ‘downgraded’ the team with a mid-level delegation from China due to travel to the U.S. capital to pave the way for Vice Premier Liu’s visit.

That was what sparked hope that this was just a trade skirmish (as Jamie Dimon attempted to play down), sending stocks soaring all week.

However, that is all over now.

The Journal  just reported on Friday that, according to sources, China has rescinded the proposals to send two delegations to Washington.

Chinese officials have said such pressure tactics wouldn’t induce them to cooperate.

By declining to participate in the talks, the people said, Beijing is following up on its pledge to avoid negotiating under threat.

“Everything the U.S. does hasn’t given any impression of sincerity and goodwill,” Chinese Foreign Ministry spokesman Geng Shuang said at a press briefing Friday.

“We hope that the U.S. side will take measures to correct its mistakes.”

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The timing of this news, after the exuberant equity week, is also noteworthy as it follows Ray Dalio’s, founder of Bridgewater, warnings that the current trade tensions mirror those of the 1930s:

“I think that the 1935-40 period is most analogous to the current period and that it is worth reflecting on what happened then when thinking about US-Chinese relations now. 

To be clear, I’m not saying that we are on a path to a shooting war, but I am saying that we have to watch what path we are on, given these cause-effect relationships that history has taught us and that are described in the template. This excerpt describes how the economic and political conditions of the late 1930s evolved into the wars that followed. “

Read more here…

We have discussed this case-effect relation before…

Get ready for some Sunday night futures fun and games…

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