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China Does a 180 Degree Pivot on Optimistic Resolution of Trade War

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Today it was announced by many new services that the Chinese officials have raised concerns about the impulsive nature of President Trump which has led them to believe that at this point in time it will be very difficult to a come to an amicable resolution to the trade war.

Although the breaking news came across through multiple respectable news or sources, for the most part almost all of them cited Bloomberg News as the primary source of this information. Add to that is the fact that Bloomberg simply cited unnamed sources as their point of contact for this information.

This news came as a major turnaround from the former assumption that the two sides had reached a tentative agreement simply called “phase one” when they met earlier this month in Washington. The belief was that they would put their tentative agreement in writing which would be signed by presidents of both countries in Chile next month.

According to Bloomberg News, “They remain concerned about President Donald Trump's impulsive nature and the risk he may back out of even the limited deal both sides say they want to sign in the coming weeks." Bloomberg’s sources also indicated that, "Some officials have relayed low expectations that future negotiations could result in anything meaningful — unless the US is willing to roll back more of the tariffs. In some cases, they've urged American visitors to carry that very message back to Washington."

The key elements that were reported today was that although talks will continue between the United States and China the Chinese are in no rush to remove tariffs immediately even though added tariffs that will go into effect on December 15 must be removed.

One of the critical sticking points to a trade war resolution is creation of fair reciprocation of U.S. technology by China. Bloomberg’s unnamed officials said that “China isn’t willing to budge on data sharing and communications.”

Most alarming is the fact that Chinese policymakers gathered in Beijing for a key political meeting that is set to conclude today there they conveyed low expectations that future negotiations would yield anything meaningful which would take both countries closer to a resolution to this conflict.

Also, the announcement by Chilean President Sebastian Pinera on Wednesday that his country had canceled the Asia- Pacific economic cooperation summit which was scheduled to be held November 16 and 17. The obvious ramifications of that is that without meeting face-to-face the possibility of signatures by both sides is impossible.

In terms of the repercussions in the financial markets U.S. equities across-the-board are lower today. With the exception of palladium, the precious metals complex (gold, silver and platinum) have all scored respectable gains. Finally, this news has put pressure on the dollar, with the index currently down 0.35%.

What traders need to take away from this breaking news is that it has changed the financial fabric of our global economy, which many analysts had hoped was moving closer to a resolution based upon recent talks between the two superpowers. The take away is that gold and silver will most likely move substantially higher over the next month, and U.S. equities as well as any other risk on asset class could fall under dramatic pressure.

Gary S. Wagner - Executive Producer