Is this the playbook for US trading later before the weekend?

With Trump having touted to “go out and buy stocks”, one can expect him to deliver something in the day ahead to vindicate his own message. And a show of goodwill by lowering China tariffs might be just that.

And let’s face it, markets will lap it all up as the buy the rumour trade goes into overdrive.

However, make no mistake. Even at 50-60% tariff levels, there’s still much pain and friction still in play with regards to US-China trade. Sure, there are exemptions and workarounds to circumvent the tariffs. And the 10% blanket tariffs elsewhere are basically an off-ramp for Trump as trade with China is facing a stall. It essentially allows for US firms to seek alternatives and substitutes but again, these things take time.

The thing here is that while markets might find comfort in Trump offering “relief” on tariffs and a “friendlier” gesture towards China before talks, it’s still a big question mark as to whether Beijing will be willing to see that as a positive step. If anything, one would expect China to want all tariffs taken off the table before sitting down to talk. And that’s a risk to watch out for going into the talks over the weekend.

So even with a supposed gesture of goodwill by reducing tariffs to 50-60%, it’s not necessarily going to be an inviting proposition for China.

The bigger picture points to some form of further decoupling between the two countries and that’s not optimistic for the global economy. But again, that’s something that markets will need time to digest and to see.

When you take a step back, it’s rather amazing what Trump has managed to achieved in the last month or so. He has pretty much hoodwinked markets into accepting 10% blanket tariffs as a good thing, not to mention the likely further decoupling between US and China in the meantime. It’s pretty much Stockholm syndrome at its finest and given the playbook above, it wouldn’t be surprising to see markets take to it again later today.