China, the United States, and the whole world awaits the outcome of the most important meeting between American President Donald Trump and his Chinese counterpart Xi Jinping. Expectations vary among experts but most of them are not hopeful for a completely positive outcome. In essence, the outcome of the meeting that is to be held during the G-20 summit this Saturday may ultimately go on to set the tone of the global economy for the rest of the year.
Many observers expect a temporary ceasefire between two economic superpowers and, if it happens, it will allow stocks to gain temporary relief. However, even a ceasefire may not be able to stop the damage that befalls the global economy unless a complete deal is reached to end recently imposed tariffs. At best, America and China are expected to hold off new tariffs and propose to restart trade negotiations.
In an event that the meeting is completely flop, the world may likely to head towards a global recession, according to Bleakley Advisory Group’s Chief Investment Strategic Peter Boockvar. According to a recent survey by the Bank of America, 2/3rd of American investors neither expect both countries to reach any deal nor do they expect any further tariffs.
According to an insider at the Trump administration, the United States goal for this meeting is to reopen negotiation from the point it broke down during last month. Boockvar believes that ‘’ceasefire’’ should be seen as a positive sign in the stock market and it could result in bond selling off, dollar bouncing and stocks rallying.
However, the economic impact of a full trade war between both countries could have drastic implications for both economies as well as the global economic situation. With existing tariffs, the US economy may suffer 0.1% of its GDP while the impact for China may be up to 0.8% of GDP, whereas global growth could be lower by 75 basis points. This would resemble a “mild recession” at the global scale.
The fact of the matter is that both economic giants would ultimately want to settle for a deal. However, the deal may not be around the corner and it will depend upon which country is willing to risk more for its aspiration. China seems to be playing smart and not taking real pressure and, on the other hand, President Trump does not seem to be pressurized by 2020 elections either.