As you might imagine, this complicates things.
Just as U.S. and Chinese negotiators struggle to put together a Part 1 deal to de-escalate the U.S.-China trade war, the two houses of the U.S. Congress are moving to pass legislation that would support pro-democracy protestors in Hong Kong.
China has officially labeled the legislation a gross interference in China’s internal affairs. Or, to put it more precisely, Chinese Foreign Ministry spokesman Geng Shuang said the aim of the bill was to “bolster anti-China, extremist and violent radicals who attempt to disrupt Hong Kong (and) damage Hong Kong’s prosperity and stability” as part of a plot to contain China’s development. The Hong Kong government released a statement expressing its own displeasure with such actions from the U.S. government, saying they are “unnecessary and unwarranted.”
The bill passed by the Senate, The Hong Kong Human Rights and Democracy Act, mandates sanctions on Chinese and Hong Kong officials who carry out human rights abuses and require an annual review of the favorable trade status that Washington grants Hong Kong.
The bill, passed by the Senate on Tuesday, now goes to the House, which has already passed similar legislation.
China’s threat too take “strong countermeasures” if the bill passes Congress makes already uncertain trade talks more uncertain. The talks seem to be at a make or break stage. The talks face major hangups over U.S. demands that China submit detailed plans to buy $50 billion in U.S. farm products (Chinese negotiators have pushed back saying they aren’t certain they can meet that $50 billion goal), and over a schedule for reducing tariffs that the U.S. has placed on Chinese goods.
Wall Street feels understandably whipsawed by Trump administration announcements that say on one day that an agreement is close and then, the next day, that a deal is in jeopardy. Yesterday President Donald Trump said “China’s going to have to make a deal that I like, if they don’t that’s it.” He then added, “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”
Today the Standard & Poor’s 500 closed down 0.38% with the Dow Jones Industrial Average finishing lower by 0.40%. The NASDAQ Composite was off 0.51% and the Russell 2000 lost 0.42%. The iShares MSCI Emerging Markets ETF (EEM) dropped 0.44%.