Team Trump is looking for a face-saving off-ramp in its global trade war, and they’re ready to announce a deal-in-kind with at least one trading partner, On The Money has learned.
How that manifests itself is unclear, but my sources are led to believe that actual deals — i.e. signed agreements even with the most friendly of trading partners caught up in the Trump maelstrom – are probably not happening anytime soon.
What is more likely is a series of public announcements coming from Treasury Secretary Scott Bessent, and possibly the president himself, indicating broad outlines of trade pacts that both sides can live with.
First out of the box appears to be India, the White House has signaled. In fact, my “X” posting on India that reported this progress immediately reversed stock market losses at the open and turned the Dow green for the rest of the day. Japan could be next followed by the UK, Australia and even the EU.
These will involve agreed upon goals, and issues that have been addressed and resolved as well as a deadline for the deals, my sources say.
What could disrupt the forward momentum? Trade partners are complaining to people on Wall Street that the US negotiating team is often obtuse in what it is asking. They sometimes don’t really know exactly what the White House wants, sources said.
The nebulousness of the ask is what stalled the Japanese negotiations last week, according to one Wall Street executive with contacts inside the Japanese government. The same thing could happen to the pending India deal.
But with those out of the way, the administration can focus on China – the biggest deal yet to be had – and among the most difficult to hash out. How and when that happens is still anyone’s guess, though the administration is now signaling to the Mainland it wants to negotiate, Wall Street executives say.
Yes, what looks like a cave often is one. This cave is based on economic and market realities of taking a major part of the economy in such drastic directions. Sure, Trump and the White House are correct in their central premise that the global trading system puts the US at a disadvantage.
But consider the short-term pain: US farmers – a key MAGA constituency – will be getting crushed until a deal is reached with China, which buys lots of our agro products. Higher costs for tariffs, even those on pause, are being baked into the economic matrix.
Bessent more than anyone can appreciate the power of the markets over the US economy. During the tariff tantrum, people stopped buying our debt, while stock indexes crashed. A doom spiral was imminent.
Main Street got screwed by globalism, but ending the global trading order all at once like Trump attempted will bring massive short-term dislocations to the markets and the economy, and for a time it did.
Of course, Trump could change his mind and go all in again on tariffs after speaking with hawkish advisor
Of course, Trump could change his mind and go all in again on tariffs after speaking with hawkish adviser Peter Navarro, and we’d be back to square one. If he doesn’t (and that’s a big if) it’s also unclear if deals of this nature will stem the economic damage already caused when Trump blasted the world with trade sanctions, then put them on pause, while he slapped massive ones on China, maybe the most important cog in the trading ecosystem.
One top CEO told me, “Time is on the side of our trading partners. Inflation, and maybe unemployment will eventually be picking because of the recent upheaval. There could be very large at least short-term damage that weakens our negotiating position.”
One thing is clear: The White House is waking up to the reality that for all the cheating on trade, we do rely on the world, China in particular, to buy our debt and sell us affordable goods.
Working-class people buy lots of cheap stuff from the Mainland. The iPhone is reasonably priced because Apple outsources some of its parts and manufacturing there. Small businesses in the US-, the alleged backbone of the economy, rely on a global network for their supplies. US factories install parts made all over the world.
Upend that, and you are looking at a recession. That’s exactly what Bessent saw staring back at the US and why he’s looking for an off-ramp. Let’s hope Trump fully joins him.
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