ABN-AMRO says that the trade war is a troubling topic that is not about to go away

Han de Jong, Chief Economist at ABN AMRO, notes today that the US's preliminary SMIs reflecting business confidence showed a steady decline last week and he stresses the importance of knowing to what extent the survey was affected by the rising tensions in the trade war with China:

"It is impossible to say with certainty what will happen in the trade dispute. The rhetoric has become very hostile. We continue to expect difficult negotiations. And we still believe that it is in the interest of both parties to reach an agreement without undue delay.

President Trump wants to be re-elected next year. He needs an agreement to show that he is a "principal" as he claims.

In addition, a complete breakdown of the talks and a strengthening of protectionist measures would harm both the economy and the stock market.

This will not be favourable to Trump's chances of re-election. Nor will a surge in protectionist measures be in the interest of Beijing's leaders, as a further economic slowdown could cause them economic, social and political problems. Our main scenario therefore remains that an agreement will finally be reached.

But there is a lot of uncertainty. It can be argued that the trade conflict is only a small component in the quest for global political, economic and technological leadership. In such a battle, the conclusion of a trade agreement is not so important.

Political leaders who consider themselves involved in such a battle for world leadership will most likely be willing to accept to inflict pain on their own people as long as they think they are inflicting more pain on the other side."