Trade news on three fronts

WED, MAY 15, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF WED, MAY 15, 2019 • 12:33 ET

DJIA		25653.32
		+0.47%	+121.27

S&P 500		2851.50
		+0.60%	+17.09

NASDAQ		7810.96
		+0.99%	+76.47

EDITOR'S NOTE

Remember how the president was facing that Saturday deadline to decide on imposing European auto tariffs?

Well, Kayla Tausche just reported that the administration is delaying those tariffs by up to six months. Volkswagen, Porsche, and Mercedes parent Daimler jumped more than 3% on the news.

At the same time, Kayla is reporting that Trade Rep. Lighthizer will float a new USMCA (U.S.-Mexico-Canada Agreement) today that includes the removal of steel and aluminum tariffs.

This is a biggie: Republican Sen. Chuck Grassley had actually been vocal in demanding their removal, saying in the WSJ that "If these tariffs aren't lifted, USMCA is dead. There is no appetite in Congress to debate USMCA with these tariffs in place." The tariffs were also seen as a stumbling block in getting Canada and Mexico to ratify the deal.

All told, the Dow's up about 130 points now, after being in the red earlier this morning.

By potentially quelling spats with our European and North American trading partners, it suggests the administration is focusing squarely on trade talks with China. Speaking of which, this whole interview on Squawk Box this morning with Steve Bannon and Tom Friedman is a must-watch.

Friedman agrees with Bannon on China, and even thinks its "misreading" of the Trump presidency "is actually one of the biggest failures of the Chinese government ever." What surprised me: Bannon's suggestion that our pressure on China--including through the financial system, if need be--will help push their ultimate "industrialization" and development.

But I'm still thinking about what Larry Lindsey told us yesterday: that Xi is becoming more and more like Mao, and perhaps doesn't want a trade deal at all. Why would he? Any such deal seems to imply a partial opening up of the economy, while he has been working very hard to seal China off from the outside world, and to consolidate power and control.

It's what Michael Novak wrote about decades ago: capitalism and democracy nourish one another. Is President Xi really going to make any trade concessions that imply freer-market reforms?

More at 1 p.m. See you then!

Kelly

Kelly Evans

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