- US/Chinese trade talks continue today in Washington
- President Trump may be closer to imposing auto tariffs if EU ambassadors today do not deliver a mandate for US/EU trade talks
- MPs to push a bill today to prevent no-deal Brexit while PM May reaches out to Corbyn for help
- U.S. ADP employment expected +175,000
- ISM non-manufacturing index expected to fall
US/Chinese trade talks continue today in Washington — Chinese Vice Premier Liu is in Washington today for another round of trade talks with Lighthizer/Mnuchin, following up on last week’s talks in China. There are market hopes that the two sides are getting close to a final agreement since reports say the two sides are now focused on ironing out the differences between the US/Chinese translations in the 120-page draft agreement.
President Trump may be closer to imposing auto tariffs if EU ambassadors today do not deliver a mandate for US/EU trade talks — EU Ambassadors will meet in Brussels today to decide whether to give EU Trade Commissioner Malmstrom the mandate she needs to begin the formal US/EU trade talks that Trump-Juncker agreed to last July.
There is concern that President Trump may go ahead with auto tariffs if the EU does not begin trade talks with the U.S. very soon. Mr. Trump is already upset that the talks have taken this long to get going and also that the EU is refusing to include agriculture in the talks.
Ms. Malmstrom has long been promising Mr. Trump that her trade-talk mandate will come soon. However, that mandate is not a done deal since Bloomberg reported on Monday that France is arguing that the EU should not hold trade talks with countries that are not part of the Paris Climate agreement, a pointed reference to the U.S.
President Trump could announce tariffs on imported autos at any time if he wishes. The Commerce Department’s recommendation on whether President Trump should impose tariffs on imported autos based on national security grounds has not yet been made public. However, there is virtually no doubt that the recommendation is that the tariffs should be imposed, in line with Mr. Trump’s guidance.
The global stock markets would undoubtedly react very negatively if President Trump announces tariffs on imported autos, which would draw retaliatory tariffs very quickly. The US/Chinese tariffs have already put a chill into global trade and the global economy. The impact of tariffs on autos would be larger than that of the US/Chinese tariffs, according to WTO Chief Economist, who points out that US/Chinese trade accounts for only 3% of global trade whereas global automobile trade accounts for 8% of world trade.
MPs to push a bill today to prevent no-deal Brexit while PM May reaches out to Corbyn for help — The UK Parliament today will hold another round of Brexit Plan B votes. The most important vote today will on a bill promoted by MPs Cooper and Letwin that would force the May government to request a Brexit extension deadline if Parliament does not pass the Brexit separation agreement, thus ensuring that there will not be a no-deal Brexit on April 12. The markets would be pleased with the passage of that legislation and sterling would likely rally since the threat of a no-deal Brexit would be removed. A Brexit extension of about a year would give the UK some breathing room to reset its course on Brexit.
Meanwhile, Prime Minister May is leaving no stone unturned in trying to get Parliament to approve her Brexit separation plan by next Friday’s April 12 deadline. After a Cabinet meeting on Tuesday of more than 7 hours, Ms. May emerged with an offer to Labour Leader Corbyn for talks on a cross-party approach that might get the Brexit separation bill through Parliament. Previous May-Corbyn talks on Brexit have gone nowhere. However, Mr. Corbyn may be open to cooperating if Ms. May sufficiently changes the political declaration portion of the Brexit bill to allow for the softer Brexit that Labour favors.
The EU on Tuesday gave Ms. May a new challenge by saying that the only way that the UK is going to get an Brexit extension beyond April 12 is if the UK Parliament approves the legislation necessary for the UK to hold elections for the EU Parliament on May 23-26. That won’t be a popular vote in the UK Parliament but would be another requirement to prevent a no-deal Brexit next Friday.
Ms. May has only until next Wednesday to come up with some type of solution to present to the EU at the emergency summit that they have called to deal with Brexit.
U.S. ADP employment expected +175,000 — The consensus is for today’s Mar ADP employment report to show an increase of +175,000, which would be weaker than Feb’s increase of +183,000 and the 12-month average of 226,000. However, an ADP report of +175,000 would be a positive indicator for Friday’s payroll report, which is expected to rebound higher to a more normal level of +175,000 after Feb’s very weak report of +20,000. The markets are currently willing to write off the weak Feb payroll report as the result of payback after the strong payroll growth averaging +245,000 in the previous three months. However, another weak payroll report this Friday for March would reawaken worries about that state of the U.S. economy.
ISM non-manufacturing index expected to fall — The market consensus is for today’s Mar ISM non-manufacturing index to fall -1.7 points to 58.0, reversing about half of February’s +3.0 rise to 59.7. Even if the index today falls to the expected level of 58.0, that would still be a relatively strong level that shows solid business confidence in the non-manufacturing sectors of the U.S. economy. The preliminary-March Markit services PMI fell by -1.2 points to 54.8, which supported expectations for a decline in today’s ISM report. However, the good news was that this past Monday’s ISM manufacturing showed an unexpectedly strong +1.1 point increase to 55.3, which at least indicated improved confidence in the manufacturing sector in March.
