Trump Battles on 2-fronts

The Trump white house is fighting two simultaneous wars and both appear to be losing. A new House of Representatives will not provide him with his desperately needed funding bill to build a wall on the southern border. At the same time, the US and China continue to negotiate a trade deal. The goal for Trump is to get China to tighten its stance on stealing US intellectual property and come up with a way of policing such issues.

A Spending Deadline is Coming Soon

Friday February 15 is the deadline for a continuing resolution or a new budget deal. This follows a temporary spending bill passed in January following 35-days of partial government closure. The Democrats are offering some money but it does not provide enough to build a border wall. Trump sees this as a non-starter. Not only is he desperate to have the money to fulfill his campaign promise that he would build a wall, he also does not want to give away issues related to immigration which he also campaigned on. Press reports suggest the democrats are providing 2-billion but the sticking point centers around limiting the number of illegal immigrants that can be detained by immigration authorities.  In the short-term, another stopgap spending bill is possible.  You can follow issues related to the spending bill on iFOREX market news.

Trump is Frustrated by the New House of Representatives

President Trump has accused Democratic leaders of hampering efforts of their congressional negotiators to reach a budget deal and avert another government shutdown. He has not once brought up the 800K Federal workers who went 35-days without pay in January. The 2020 campaign is fast approaching, and Trump needs some form of base to drive rallies. He will not just be able to shoot down Democrats.

US and China are Far Apart on Trade Talks

The US and China remain far apart in trade talks.  The message that Trump and Xi will not meet before the self-imposed March 1 deadline, shows the markets where the two sides are on the talks. US trade representative Lighthizer and Treasury Secretary Mnuchin are expected to travel to Beijing for another round of talks.  Officials are downplaying the chances of any breakthrough.  Rather, it appears that higher US tariffs may first kick in March 2 before a face-saving deal is struck.

The markets will be looking to see if the tariffs come in at 10% or 25%. A 25% March 1 tariff will likely weigh heavily on equity markets around the globe. The top U.S. trade duo will confer with Chinese Vice Premier Liu He. The key to this week’s talks is what Lighthizer and Mnuchin report back to President Trump and whether that will clear the way for a meeting of Trump with Chinese leader Xi Jinping.

Chinese Spending Contracts

Both the US and China are feeling the pinch of slower growth. The Chinese are feeling the brunt of the deal as spending during the Lunar New Year holiday is estimated to have grown 8.5%. This would be the smallest spending during the new years’ celebration since 2011. The Trump administration believes that the weakness in the Chinese economy would give them the advantage and while China wants a deal, they are willing to hold on for the long term.

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