U.S. and China talk trade. The U.S. and China concluded a new round of trade talks on Wednesday, which were extended into a third day. Beijing is looking to give U.S. President Donald Trump every opportunity to declare victory and move on. On Monday, for example, Chinese traders told Reuters they had ordered some 900,000 metric tons of U.S. soybeans. (Chinese imports of U.S. soybeans tanked after the White House’s September round of tariffs.) Chinese President Xi Jinping dispatched his top economic adviser, Vice Premier Liu He, to drop by the negotiations, signaling Beijing’s commitment to implement any concessions it makes. Markets are responding positively – all the more important as Beijing is worried that souring investor sentiment will make handling its internal economic woes all the more difficult. Still, there’s ample reason to be pessimistic that a deal on tariffs will end the mounting spat over Chinese technology and industrial policies. On Wednesday, the hawkish Global Times (a mouthpiece for the Communist Party) warned of a consumer boycott of U.S. goods if Washington pushes too far. The U.S., meanwhile, laid out new evidence of alleged transgressions by Chinese tech giant Huawei. Both sides are still girding for a long fight.
Turkey’s harsh words for Bolton. Tuesday was a busy day for U.S.-Turkish relations. Turkish President Recep Tayyip Erdogan lashed out at U.S. National Security Adviser John Bolton, who was in Ankara to discuss the impending U.S. withdrawal from Syria. Ahead of the visit, Bolton said the U.S. wouldn’t withdraw until Turkey guaranteed the safety of Kurdish forces – pivotal allies in the U.S. effort to combat the Islamic State. Erdogan reiterated that Ankara does not differentiate between Kurdish groups in Syria and those in Turkey, nor even the Islamic State (which, also on Tuesday, happened to conduct its first suicide attack in Raqqa in over a year). Erdogan went further – refusing to meet with Bolton and saying his comments were a “serious mistake.” He’s evidently concerned that the U.S. may find a way to stall Trump’s plan to leave Syria; the same day, Erdogan penned an op-ed in The New York Times praising Trump and making the case that Turkey is ready and willing to destroy the Islamic State once and for all, in recognition that U.S. public opinion could either aid or thwart Erdogan’s carefully laid plans.
Parliament ramps up for a Brexit vote. British Prime Minister Theresa May has suffered another defeat at home. On Tuesday, 303 lawmakers, including 20 from May’s Conservative Party, voted to restrict her government’s tax-raising powers if Brexit negotiations fail to reach a deal. The Labour-proposed amendment doesn’t take a no-deal Brexit off the table, but it does make it potentially more painful for the U.K. and diminishes the negotiating power of May’s government. (The threat of no deal is the best leverage the U.K. has, but the EU’s position is that the negotiations are over.) The much-anticipated vote on the deal is scheduled for Jan. 15 – and it’s widely expected to fail. A Labour representative said in an interview that if it fails, Labour would put forward a vote of no confidence. While all outcomes – May’s deal, no deal, a slightly different deal and no Brexit – are still on the table, our position remains that a deal is the likeliest outcome, but it will be extremely difficult to achieve without extending Article 50 and delaying Brexit. Since an Article 50 extension requires the consent of all 27 EU member states, several of which still want more concessions from the U.K. (especially Spain on the issue of Gibraltar), an appeal from London for an extension won’t make things any easier for May.
Signs of recession. There are increasing indications that Germany may be in a technical recession (defined as two consecutive quarters of negative economic growth). We won’t know for sure until Jan. 15, when the German statistics office publishes preliminary gross domestic product figures for the fourth quarter of 2018. But Germany’s GDP shrunk by 0.2 percent in the third quarter, and another quarter of shrinkage would qualify as a recession. This appears likely given the string of pessimistic economic data emerging from the country – most recently, on Tuesday, the statistics office announced that industrial production had fallen 1.9 percent in November compared to the previous month. Most economists are still forecasting a very modest rebound for the German economy in 2019, but that was the expectation for the fourth quarter as well. And on Wednesday, German Finance Minister Olaf Scholz said the government doesn’t expect to take in a tax surplus this year. Germany is the economic engine of the EU, so where it goes the other member states will soon follow.
- North Korean leader Kim Jong Un completed his fourth visit to China in the past year.
- Moscow says Russian military police have begun patrolling around the Syrian city of Manbij.
- Italian Deputy Prime Minister Matteo Salvini is in Poland for talks with Polish ruling party leader Jaroslaw Kaczynski on forming a euroskeptic alliance to contest the European Parliament elections in May.
- Afghan Taliban representatives called off two days of peace talks with U.S. officials in Qatar, reportedly over U.S. insistence that Afghan government officials take part.
- The EU froze the assets of an Iranian intelligence unit and two of its staff allegedly linked to the killings of Iranian dissidents in the Netherlands and foiled attacks in France. Iran threatened reciprocal measures.
- The U.S. slapped sanctions on seven prominent Venezuelans, including the former national treasurer, the owners of the Globovision television station and nine Miami-based companies. Meanwhile, Venezuela launched a World Trade Organization challenge against existing U.S. sanctions.
- Brazilian National Security Adviser Augusto Heleno and Defense Minister Fernando Azevedo e Silva said that newly inaugurated President Jair Bolsonaro had not offered to host a U.S. military base or U.S. soldiers and is not entertaining the idea. This follows comments by the president and his foreign minister last week expressing interest in the possibility.
- U.S. Secretary of State Mike Pompeo is in Iraq for a round of high-level meetings, following President Donald Trump’s visit to U.S. forces in Iraq in December.
- Moscow is ready for working-level talks with the United States on the Intermediate-Range Nuclear Forces Treaty, Russian Deputy Foreign Minister Sergei Ryabkov said.
- The World Bank has warned that the economic fallout from a no-deal Brexit could extend beyond EU member states to Eastern Europe (Ukraine, Moldova and Belarus) and North Africa and the Middle East (Turkey and Morocco).