All Eyes on G20 Summit

On trade talks, Citi’s base case is for a preliminary understanding between US and China on trade that leads to further trade talks, with specific schedules for target reviews, and with further trade measures on hold.

However, the failure to deliver a communique in the APEC Summit and the USTR’s report highlighting China’s continued market-distorting practices suggest that the risk of an escalation of tensions is material.

Although there may not be an easy resolution on US and China trade conflicts, Citi believes apprehension from nearly 8 months of trade war headlines is mostly priced into markets.

On the United States–Mexico–Canada Agreement (USMCA) deal, Citi analysts expect officials from the 3 countries to sign the deal during the G20 Summit. Once the deal is signed, Citi analysts expect each trading partner to initiate the ratification procedure.

While there is unlikely to be any setback for ratification in Mexico or Canada, but remaining steel and aluminum tariffs and Canadian Federal elections pose some risk of delay.

In the US, Citi analysts believe the road to ratification is unlikely to be smooth. There is a possibility that the USMCA could be scuttled by the new US Congress. But ultimately, Citi analysts believe that the economic significance of the USMCA suggests that the US Administration can gather sufficient votes to ratify the USMCA deal in 2019.