THE DAILY MACRO BRIEF: Truce between the US and China could be extended, Brexit talks at a standstill…

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02/20/2019 | 02:07 pm
Donald Trump remains optimistic about the progress of trade talks with China and reiterates his intention to extend the truce. While negotiations between the United Kingdom and the European Union are still at a standstill, Theresa May is intensifying efforts to solve the backstop issue.

Productive talks. Although complex, the trade talks between Chinese and American representatives in Washington "are going very well", said Trump on CNBC. He added that there is still much progress to be made, and that the deadline of March 1 could be extended. "I can't tell you exactly about timing, but the date is not a magical date. A lot of things can happen.” The President once again threatened a possible increase in tariffs on products imported from China to pressure the opposing side to move forward in the negotiations. The United States expects the Middle Kingdom to promise not to devalue its currency, to buy American products and services, to stop the imposed transfer of technology and to respect intellectual property rights.

As the Brexit deadline looms, the discussions are still going in circles. Philip Hammond, the United Kingdom's Finance Minister, said yesterday that Europeans would not replace the Northern Irish backstop, but that a Brexit without an agreement would be a "calamity" for both sides. He added that other compromises could, however, be considered, referring to the "Malthouse compromise". However, according to journalists, the British government does not intend to rely on this compromise in negotiations with Brussels... Jeremy Hunt, the head of British diplomacy, said that changing the backstop was "the only way" to avoid a Brexit without agreement.

A meeting was held at 6:30 pm between Theresa May and Jean-Claude Juncker. The British Prime Minister persists, and wants, once again, to try to convince Brussels to amend the Brexit agreement to obtain the support of her Parliament. A European diplomat has just announced that the United Kingdom has until March 10, perhaps until March 15 at the latest, to reach an agreement with the EU, otherwise they will have to postpone Brexit or leave (without an agreement).

In other news. France borrowed €5.57 billion on the markets in the short term and raised €7 billion at May 2050 (demand for these bonds reached €31 billion). The unemployment rate in the United Kingdom ended at 4.0% in 2018, the lowest rate since 1975. Japan's trade deficit widened from 222 billion yen in December to 370 billion yen in January. Japanese exports fell by 8.4% in January, after a decline of 3.9% in December. The pension reform project in Brazil will be presented to Congress on Thursday, and should save 800 billion reals over ten years.
Romain Fournier
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