Mueller Report Seen as Strengthening Trump Hand in Trade Talks

US President Donald Trump (L) and China's President Xi Jinping leave a business leaders event at the Great Hall of the People in Beijing on November 9, 2017.

A dark cloud has lifted from over the trade talks between the U.S. and China.

For months, the prospect that President Donald Trump or his close associates could be accused of collusion with Russia has thrown a shadow over the administration’s trade negotiations with China. Sunday’s release of the special counsel’s conclusions, which largely ended the threat of impeachment, give China more incentive to agree to a deal, according to many experts.

“This will be seen as a win for the President. And therefore, on balance, it will be seen as strengthening the U.S. negotiating position,” Kevin Rudd, president of the Asia Society Policy Institute and former Australian prime minister, said on CNBC’s “Squawk Box” Monday morning.

John Rutledge, SAFANAD Chief Investment Officer, agreed with CNBC “Worldwide Exchange” anchor that the end of the Mueller investigation and exoneration of Trump would “open up the possibility for more hardcore, real talks.” Rutledge said the report helps because it makes it more likely Trump will win re-election.

“I think it helps,” Rutledge said. “I think the Mueller report, or actually the Barr report, has now increased the duration of the Trump administration. And so you’ve got more likelihood you are dealing with the same guys in two years. And you’ve also got more likelihood that you’ve got the same tax rates in two years. ”

Some analysts expressed concern that the Mueller report could embolden the Trump administration to push China beyond its tolerance for change in the trade talks.

“China will still have red lines, and a deal is by no means guaranteed, but the fact that an impeachment looks less likely will be meaningful for Beijing’s calculus,” Michael Hirson, Asia director at consulting firm Eurasia Group, said in an email to CNBC. “One question now is whether Trump himself decides that he now has more leverage over Beijing and drives a harder line in negotiations.”

Investors appeared to agree. On Monday, foreigners dumped the most Chinese shares on record, according to Bloomberg.

“Overseas investors net sold 10.8 billion yuan ($1.6 billion) of mainland shares Monday, the biggest single-day sale since the second exchange link with Hong Kong opened in December 2016,” Bloomberg reported.


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