China Trade Deal Looking Less Likely; The Pete Buttigieg Craze

Insights and Market Perspectives

Author: Greg Valliere

November 20, 2019

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WON’T GET FOOLED AGAIN: How many times have we heard that there was an “agreement in principle” between the U.S. and China on trade — only to have the talks subsequently bog down over the details? With enormous fanfare, the White House announced on Oct. 11 that a deal was done, in principle, but it’s not
done. We agree with this morning’s piece in the Wall Street Journal — the talks are stalled.

NEITHER SIDE CAN AGREE on lifting existing tariffs, and as a result even more tariffs loom on Dec. 15 — and yesterday President Trump warned that tariffs could go even higher if there’s no trade progress soon.

LOWERING OUR EXPECTATIONS: The most we anticipate is a vague agreement for China to make more agricultural purchases in exchange for no new tariffs; the heavy lifting will be left for “Phase Two” talks that could drag on for another year or longer on difficult issues like China’s subsidization of state-owned firms, and potential penalties for intellectual property theft.

THE WORST CASE SCENARIO is that even a modest Phase One deal will fail, with the Chinese deciding to take a risk, waiting to see who wins the U.S. presidential election next November. This much appears sure: no one will get fooled again if the president or Larry Kudlow proclaim that an “agreement in principle” is imminent. The devil will be in the details.
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THE DEMOCRATS HAVE STILL ANOTHER FRONTRUNNER: Iowa and New Hampshire, two of the whitest and oldest states in the nation, continue to have a disproportionate influence on American politics, as the primary season rewards retail politicians who — literally — try to meet every potential voter at least once. Not surprisingly, there’s a new frontrunner.

THE EARNEST AND ARTICULATE PETE BUTTIGIEG now leads in those two states. Voters are concerned about Joe Biden’s age (he turns 77 today) and his son’s cronyism. They think Elizabeth Warren’s proposals are too radical. They like Bernie Sanders’ authenticity but don’t see him as a plausible president. So it was inevitable that a fresh face would emerge — not the Wall Street billionaire Michael Bloomberg, 77, but the affable 37-year-old gay war veteran, Buttigieg.

IS BIDEN IN TROUBLE? Yes, but he’s still the shaky frontrunner nationwide. We continue to believe Democrats will conclude that he has the best chance of beating Trump. But Biden needs to do well in tonight’s debate — very well — against Warren and Sanders, targeting their health care policies.

BIDEN STILL HAS A GOOD CHANCE OF BREAKING OUT in South Carolina on Feb. 29, but before that he gets there, he needs to finish in the top three in Iowa and New Hampshire, and it’s possible he won’t.

MEANWHILE, DOES ANYONE REALLY THINK a Buttigieg-Trump race will focus on serious policy issues? Buttigieg’s personal life will generate a frenzy of tweets on far right. Sorry for being politically incorrect this morning, but this needs to be said: Is America ready for a gay president? The jury is still out on that. Hell, we’re not even sure America is ready for a female president.

SO HATS OFF TO MAYOR PETE for coming this far; he’s a joy to listen to. It will get tougher for him from here because the frontrunner always becomes the target — and there’s time for still another Iowa frontrunner to emerge in January. Everyone in the race knows Barack Obama surged at the last moment in 2008; Buttigieg may be peaking too early.