Beijing Reportedly Planning To Ambush US With Last-Minute Demand To Drop Tariffs

Just minutes after the Dow closed at a fresh ATH (Trump tweet incoming), a headline that appears to cast doubt on the viability of the “Phase 1” deal after senior government officials and media in both China and the US spent the whole day talking it up.

On the surface, it doesn’t look like much: As the two sides continue tying up loose ends, Beijing is looking for the removal of the 15% tariffs imposed in September.

BEIJING IS ALSO PUSHING U.S. TO REMOVE A 15% TARIFF THAT WAS IMPOSED ON ROUGHLY $112 BLN WORTH OF CHINESE GOODS ON SEPT. 1 – POLITICO CITING SOURCES

Follow the story live: https://t.co/m2JBwOmVug

— First Squawk (@FirstSquawk) November 4, 2019

While algos apparently didn’t make the connection (there was only a modest reaction in Dow futures), anybody who has been closely following the talks should know that Washington has only promised to consider removing the upcoming December round as part of the deal: Earlier tariffs haven’t been discussed. And there’s probably a good reason for that: Washington has so far been extremely reluctant to offer any tariff relief (part of Trump’s insistence that the Chinese must prove adherence to the deal before the trade barriers come down).

Dow futures were knocked down a peg:

But if the market’s recent performance is any guide, there will be more losses to come as the week wears on.

To sum up, it looks like the Chinese are returning to their old ways of making big demands at the last minute – demands that ultimately scupper any kind of deal (the US has repeatedly accused Beijing of negotiating in bad faith). Which means that the White House could probably back away now and save the West Wing staff the trouble of planning another high-profile meeting.