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Kim Miscalculates — and there are Implications for China Trade Talks

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Insights and Market Perspectives

Kim Miscalculates — and there are Implications for China Trade Talks

Author: Greg Valliere

February 28, 2019

THE ART OF NO DEAL: A key feature of Donald Trump’s negotiating playbook is to walk out, as he did early this morning in Hanoi. We were wrong; we thought Trump so needed a victory that he would agree to virtually anything — at the least, the establishment of a consulates in both countries.

BUT KIM JONG UN MISCALCULATED, thinking he could get all U.S. sanctions lifted in exchange for shutting only one North Korean nuclear site — hardly a denuclearization. We suspect Trump’s hawkish aides told him this wasn’t a deal worth pursuing, and to his credit, Trump walked. (Not to his credit — hastily scheduling a summit without first laying the groundwork).

SO WE HAVE TO WONDER — WHAT DOES THIS MEAN for the China trade talks? Trump has sent a message to Beijing that he’s willing to reject an unsatisfactory deal, which makes us think the ongoing talks may not be resolved as quickly as the markets expect. We still think there will be a trade pact this spring, but with teeth on issues like verification, a major plus in our opinion.

COULD TRUMP BOLT THE CHINA TRADE TALKS? Can’t rule this out; there are at least a dozen unresolved issues. The implicit message from Hanoi is that Trump could walk out on the Chinese as well, and that might prompt concessions; Beijing needs a deal just as much as Trump does, perhaps more considering the decelerating economy in China.

SO THIS COULD CHANGE THE DYNAMICS of the China trade talks. Yes, Trump needs a victory, but he won’t embrace a deal at any cost; that’s the clear message this morning.

THE COHEN HEARINGS: At least we got that one right — yesterday’s circus had virtually no impact on the markets and changed very little. Yes, Trump is an unsavory character, but that’s hardly news. The hush money to women is a serious matter, probably criminal, and we suspect former Trump CEO Allen Weisselberg has added fresh details in his interrogation by Robert Mueller’s staff.

TRUMP IS HARDLY FREE AND CLEAR — pit bulls in the Southern District of New York have plenty of leads to follow — but we still don’t think there are enough votes in the Senate to convict Trump, even if the House impeaches him (still a 55% chance of the latter). Republicans won’t turn on the president, which was abundantly clear yesterday.

JUSTIN TRUDEAU, IN REAL TROUBLE: Finally this morning, a sign that political dysfunction is not confined to the U.S. or the U.K. The Trudeau administration was rocked yesterday by testimony from a former justice minister, who said she was aggressively pressured by Trudeau aides to drop her corruption probe of the big Quebec engineering and constriction firm, SNC-Lavalin, which allegedly concealed details involving bribery in its dealings with Libya.

WE’LL DEFER TO OUR COLLEAGUES in Toronto on whether Trudeau’s plunging poll numbers can recover before this fall’s elections; he has denied any impropriety and a compromise could emerge with SNC Lavalin. But with opposition leaders calling for his resignation and an ethics probe now taking shape, our sense is that Trudeau is now the underdog in October.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

©2021 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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