Citi Wealth Insights

At the G20 Summit, Presidents Trump and President Xi said the US would hold off on raising incremental new tariffs, while US and Chinese representatives resume work on trade negotiations where they broke off in early May. This outcome was largely in line with market expectations.

In the US, importers and consumers pay directly for the tariffs while in China, exporters pay via declining business volumes and job losses.

Trade negotiations between the US and China have so far followed a strikingly similar pattern with the Plaza Accord. In both cases, talks were precipitated by a large bilateral trade imbalance and a perception of an “unfair” advantage, which were exacerbated by new US administration that pursued tax cuts even as the Federal Reserve was in tightening mode.

Citi analysts continue to see markets as unprepared for the heightened risk of a prolonged economic struggle that could extend beyond the two economies.

Tariffs on the remaining imports from China would have a larger impact on US consumers than previous rounds.

The US economy is growing at a fairly strong pace – But where is the inflation?