The heavily anticipated G20 Summit is finally underway in Japan.
We have seen the global equity markets bounce around in response to chatter from both Beijing and Washington.
Economic data from both sides of the fence has shown cracks that have led to a material shift in FED forward guidance. The Chinese government has continued to provide support. It may be last chance saloon to avoid tariffs on all goods exported to the U.S, however.
How both leaders address other world leaders in the early part of the Summit could give some insights into what to expect.
Early News
In the early hours of this morning, news from the Summit suggests plenty of sideline action.
Trump
Trump has already held meetings with Japan, India and Germany’s heads of state. The U.S President will need to be on the charm offensive. Walking out of key meetings this time around may not be an option.
While the U.S President has been a stern advocate of protectionism, political isolation from the world stage would not suit his needs at this juncture.
The U.S Presidential Election campaigns have kicked off and, with the FED and central banks sounding the alarm bells, the odd auto factory is unlikely to be enough.
Trump will need to come away from the G20 with a string of positives to get his campaign off to a flying start. No one will care where the U.S equity markets are today, but voters will care when it comes to election day.
For U.S farmers, it’s an altogether different story, however.
Financial support from the Republicans was a stop-gap last month and Trump is not going to be able to keep filling the farmer coffers.
The U.S goods trade deficit widened from $70.92bn to $74.55bn in May, according to figures out of the U.S on Wednesday.
From Trump’s perspective, some form of an agreement to support soybean exports to China will need to be achieved. China may be too demanding, however.
China Premier Xi
The Chinese Premier has continued to maintain his negative views on protectionism at the G20 Summit this morning.
While the U.S has materially shifted on foreign policy, supporting protectionism, China has continued to open its doors to foreign investment.
Unfortunately for China, the Chinese economy alone is not enough to sustain the rest of the world excluding the U.S.
Japanese Prime Minister Abe has already been in talks with both Premier Xi and President Trump.
What to expect?
While Premier Xi will be looking to build both economic and political ties with other members of the G20, the might of the U.S can’t be ignored by the other 18 members.