Prediction: Trump Will Cut a Deal with China “Pretty Quickly”

Usually the stock market is forward-looking, but last week’s short-term traders focused their thoughts on the tariffs that the U.S. and China are imposing now. Instead, they should look ahead and consider how soon the two nations will be forced to work out a deal.

That’s an argument proposed by Charles Gasparino, a New York Post columnist and correspondent for FOX. In a post on X recently, Gasparino suggested that “some Wall Street traders… believe Trump is poised to cut a deal with China pretty quickly.”

Of course, the mainstream media doesn’t want Americans to consider this possibility. Instead, they’ll purvey doom and gloom with headlines like “Republicans can kiss good-bye to their majority” and “What is stagflation, and how does it impact you?”

Big-bank analysts certainly aren’t easing investors’ concerns. For example, Morgan Stanley Chief Investment Officer Mike Wilson maintained a worst-case-scenario tone when he wrote, “If high tariff rates stay in place, negotiations are drawn out over a multi-month period and additional measures are taken with key trading partners, the risk of a recession/our bear case is likely to rise more materially.”

Courtesy: @ZeroHedge

Investors’ sentiment is low, almost to the same level as it was during the COVID-19 pandemic. Always remember, though, that the best time to buy assets is when you don’t want to.

In any case, even after China hit back with its own tariffs, Gasparino reminded investors that the country cannot easily afford to prolong the trade war. “The Chinese economy is (if the reports are accurate) weak to crashing,” he observed.

Besides, the global economy is interdependent and China can’t operate in isolation. As Gasparino put it, China is “resorting increasingly to currency manipulation to weaken the yuan in order to keep its massive trade surplus. It needs access to US markets.”

It’s interesting that some analysts would assume a prolonged trade war as the base case. Already, there are signs that America’s trade partners are ready to compromise.

On Sunday, U.S. National Economic Council Director Kevin Hassett announced that more than 50 countries have reached out to the White House to begin trade talks. I don’t know whether China is among those 50 countries, but I suspect that we’ll all know soon enough.

Indeed, it wouldn’t surprise me at all if one country after another soon starts negotiations with the U.S., or if President Trump starts making deals. Already, the president of Taiwan is ready to make a zero-tariffs deal with the U.S.:

Courtesy: @chigrl

As Reuters reported, Taiwan President Lai Ching-te expects that his country “will be able to increase investment in the U.S. and deepen Taiwan-U.S. industrial cooperation.” He added, “All purchases will be actively pursued,” referring to Taiwan making purchases from America’s defense industry and other sectors.

You might think that Taiwan is a small economy, but bear in mind that it’s home to Taiwan Semiconductor. That’s the world’s biggest semiconductor manufacturer, so a trade deal between the U.S. and Taiwan would be a pivotal event.

In addition, Reuters reported that, according to “an Indian government official… India does not plan to retaliate against” Trump’s tariffs. Similarly, the government of Indonesia reportedly has no plans to impose retaliatory tariffs against the U.S.

Granted, progress with China could take longer than it would with, say, Taiwan or Indonesia. Nevertheless, it’s not in China’s interest to extend the trade war. So, if a deal is reached and the stock market suddenly zooms higher, don’t say you weren’t alerted ahead of time.