00:00Now, Treasury Secretary Scott Bessent has announced the U.S. and China have sealed a two-month extension to their
00:06trade truce.
00:07The deal comes as Xi Jinping arrives to Washington for his first state visit in 11 years.
00:13I'm now joined by Christopher Smart, founder and managing partner of the Arbroath Group.
00:19Christopher, thank you so much for joining us.
00:21So we did get this news of a trade truce.
00:24Let's just first get your reaction to how that potentially sets up what we'll hear over the next 24 to
00:3048 hours from this meeting.
00:34Well, Jennifer, good morning. It's great to be with you.
00:36I think what is important to know about this meeting is, before we get to what is on the agenda,
00:42is to note everything that's not on the agenda.
00:44These are two countries, two economies with very long lists of claims against one another, issues from the South China
00:53Sea to democracy in Hong Kong to fentanyl to climate change
01:01and a whole variety of things that really are not going to be talked about at this meeting.
01:07For President Xi Jinping, I think there's a huge relief in the fact that he will not have to discuss
01:14China's very large trade surplus with the rest of the world,
01:17which is probably the dominant fact for the global economy right now, that the Chinese economy is slowing,
01:22but its manufactured exports continue to grow at the expense of production and growth in other economies around the world.
01:30That's also not going to be on the table. And now what you have just reported from Scott Besant,
01:37that there has been this decision to sort of kick the can down the road two months on trade issues,
01:44the U.S. agreeing not to raise any tariffs against China and China agreeing, apparently, to continue to support rare
01:53earth exports.
01:56That is also not going to be discussed when the two leaders meet.
02:00So a lot of issues are now off the table. And so we're going to be focused more on what
02:06remains.
02:07And I think that has to do largely with things around Taiwan, perhaps AI, and maybe, maybe some hint from
02:18President Xi
02:19that China will buy some more U.S. exports. But that's not going to be big headline news, given what's
02:26already been taken off the table.
02:28So then what would be a win for both of these sides, if, in fact, we do see Taiwan and
02:34tech being the focus then for this agenda?
02:39I think that's the right question to ask. I think for President Xi, anything that shows a wobbling on the
02:48part of the United States in its support for Taiwan
02:50or a clear commitment to delay any arms sales to Taiwan, you know that there is an $11 billion package
03:00that Congress has approved.
03:01President Trump agreed to delay or review his final approval on that.
03:07You know, if he puts that off anymore or maybe says some, makes some unscripted remarks about Taiwan being less
03:14important to the U.S.,
03:16I think that would be a huge win for President Xi. Frankly, just coming to the United States right now
03:23and watching the world compare the two countries
03:28with the U.S. clearly bogged down in a conflict in Iran that is no, shows no sense, no signs
03:37of ending anytime soon.
03:41Allies of the United States having been alienated by the president on a variety of issues.
03:48And China, President Xi is coming from big meetings with counterparts in the BRICS, with the Shanghai Cooperation Organization,
03:57and a sense that China is really taking yet a further step onto the global stage, even as the U
04:03.S. may be pulling back.
04:06Do you think, Christopher, the markets then really sort of take a step back and wait until January 10th for
04:14any more substance to come?
04:17How do you think this really shifts potential sentiment that the markets are going to get between the two biggest
04:24economies in the world?
04:27Well, I think the markets have already kind of priced in the fact that not much is going to come
04:32out of this meeting,
04:34that there is this trade truce. I think what's important from this meeting as I deliver a message that not
04:43much is going to come of it,
04:44the meeting itself is important. The fact that the two leaders want to keep things on track,
04:49the fact that President Trump went to the airport to meet President Xi, I think shows that he wants this
04:54to be a good meeting.
04:54He wants the relationship to improve in spite of all of the other challenges, as I've laid out.
05:00President Xi coming here, he wants to show some forward momentum or at least show that the two powers are
05:08talking about these issues,
05:09even if they aren't coming to agreement on them. I think so the markets aren't necessarily expecting a big settlement.
05:17It would be nice to have a longer extension of the two months that will have to wait.
05:22But, you know, markets are really much more focused on signs of inflation, whether the Saudi pipelines are going to
05:28be reopened,
05:30what's going to be happening with Ukrainian attacks on Russian refineries.
05:35Those are the kinds of things that the market is pricing in right now.
05:38And that's what we're seeing, I think, in terms of the the bond market meltdown.
05:42So, let's go.
05:42Let's go.
05:42Let's go.
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