(29 APRIL 2019)DAILY MARKET BRIEF 1:The race for trade agreements is on

Now that the US slowly enters into election season, time is running out to ratify trade agreements. The US – China trade talks have been lasting longer than the Trump administration had expected, but it seems on good track as US negotiators are turning their effort towards other partners, including Japan and the EU, although further hurdles remain.

Indeed, as US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are expected to travel on Tuesday in Beijing while a second meeting in Washington will include Chinese Vice Premier Liu He next Wednesday, it seems that hopes of a trade deal by next month are rising. Progresses have been made on issues such as intellectual property and technology transfer while the enforcement mechanism framework, including a defined timeline, is still in production. Yet despite this potential breakthrough, Trump’s campaign promise of reducing trade balance deficit is still on the table. Bilateral trade talks between both US and Japan had already been confirmed last September and have only started this month while it is not expected to be a quick resolution. Both Japanese PM Shinzo Abe and US President Donald Trump have differing political schedules timing, pushing the date of a potential agreement by September 2019 earliest. The topics targeted would focus mainly on agriculture as US concerns are that the 11-country Trans-Pacific Partnership (TPP) agreement, effective since last December and which the US decided not to be part of, would allow Australia to absorb a significant market share at the expense of US farmers. In addition, discussions with the EU have not even begun yet, and a conflict in the topics to be addressed is already emerging. Whereas the EU is willing to open discussions on cutting tariffs in industrial goods (incl. automotive) and work on EU/US product standards facilitations, a red line for what concerns agriculture restrictions should stay, paving the way for further trade tit-for-tat actions.

EUR/USD is trading at 1.1165, approaching 1.1145 short-term.