Talks of a trade war with China have momentarily taken a backseat to increasingly acrimonious negotiations with Canada, Mexico in addition to the European Union, as President Donald Trump spent much of the last week exchanging barbs with major economic partners.
However, one veteran market watcher warned in which investors should stay vigilant on the threat coming from China – because the idea could roar back to roil markets if the U.S.-North Korea summit goes awry.
“We’re relying on China for help there so I don’t expect Trump in addition to company to start blasting China with tariffs in anticipation of in which meeting,” Jack Ablin, chief investment officer at Cresset Wealth Advisors, told CNBC’s “Futures currently” on Thursday. “If China is actually smart what they’re going to do is actually string Trump in addition to Company along with North Korea.”
China has positioned itself as an invaluable resource to the U.S. in pressuring North Korea to denuclearize, Ablin said. in which has given the country a bargaining chip against any trade threats, in addition to the Trump administration may be loath to antagonize Beijing if the Chinese can help sway Pyongyang.
Trump is actually set to meet North Korean leader Kim Jong Un face to face in Singapore on Tuesday. The Trump administration has said the aim is actually full denuclearization, something North Korea is actually not required to give up without a fight.
“yet, if these negotiations go south or there’s some disappointment, I expect these tariffs will be back on the table,” Ablin added.
Meanwhile, the chances of a trade conflict with China are far higher than the markets anticipate, says Ablin.
“The likelihood of an outright trade war with China is actually probably 30 to 40 percent,” the investor told CNBC. “So the idea’s not a main, huge risk yet I will say if you ask the average investor about the possibility of a trade war with China, they’d probably tell you the idea’s 10 percent.”
He added: “I do think I want to err on the side of caution.”
Ablin said tariffs on China, the planet’s second-largest economy, would certainly be “enough to create a sizable [downward] catalyst” for the U.S. stock market.
As for the potential for the North Korea summit itself to be market-moving, Ablin says expectations are so low in which any development would certainly be a positive.
“the idea’s genuinely only upside pretty much,” he said. “Most observers are not expecting much in addition to so if anything comes of the idea, the idea will be positive yet in which said the idea will likely just kind of string things along.”
Markets have not moved as much on North Korea-U.S. developments recently. When Trump called off the summit on May 24, the S&P 500 ended the day 0.4 percent lower. After the June 1 announcement in which the idea was back on, the S&P gained 1 percent.