Recent news on the trade wars has been uniformly good. As reported in this article, Trump has agreed to postpone tariff increases on certain Chinese exports to the U.S. until mid-October. That’s an important date because it comes after the Oct. 1, 2019, celebration of the 70th anniversary of the Communist takeover of China in 1949.

The Chinese would like their celebration to go off without acrimony or discord (including demonstrations in Hong Kong), so they are grateful for Trump’s delay. China reciprocated by excluding pork and soybeans from their own list of increased tariffs on U.S. exports to China. At the same time, both sides are preparing for a new round of trade talks tentatively scheduled for mid-October when these tariff and other nontariff barrier-related issues will be addressed.

The stock market has rallied on this run of good news. Does this mean the trade wars are coming in for a soft landing, as the market seems to expect? Not at all.

Both sides have selfish reasons for these concessions. As noted, China has its hands full with Hong Kong and would like to avoid further confrontation with the U.S. before the Oct. 1 celebrations.

Trump is running for reelection in 2020 and relies on a strong U.S. stock market to help his chances. The delayed tariffs should be understood as temporary and cosmetic moves designed to achieve domestic political goals.

None of the hard trade issues (intellectual property theft, verification processes, direct foreign investment, etc.) has been dealt with at all. Even if these matters are discussed at the mid-October meetings, they are months and possibly years away from resolution, if ever. None of the wider geopolitical issues (South China Sea, Taiwan, Korea) is being addressed in this forum.

The stock market has a reprieve, but don’t expect it to last. Stock markets have been up and down and back again for almost two years based on the latest good (or bad) news on the trade wars. Expect that pattern to continue. This means getting ready for the next downswing by late October.

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