Trade “mini deal” won’t prevent further slowdown

Trade talks with China look set to conclude today with a “mini deal”, reducing the immediate risks of a further rise in tariffs. But existing tariffs will remain in place, including the September tariff hike, which has yet to really affect the economy. Accordingly, even though the yield curve un-inverted this morning on the news of a prospective deal, we still expect economic growth to slow in the coming months, prompting the Fed to cut rates in December. Moreover, we’ve been here before with temporary truces in the US-China trade war. This one may not hold much beyond a possible Trump-Xi head-to-head meeting at the APEC summit in mid-November.