5 things you need to know before the markets open in Australia and around the world.

1.Trump Set for US-Economy-Defining Trade War Talks with China

US and Chinese officials are set to meet in Washington, DC, on Wednesday with the continuation of trade talks on top of the agenda. The goal is to end the trade war before the US increases tariffs on US$200 billion worth of Chinese goods on March 1st.

As the two sides meet under a huge amount of pressure from their respective countries, they remain far apart on many major issues. Complicating the meeting is the extradition request that the US has placed on the Huawei CFO Meng Wanzhou.

The Trump team is led by US Trade Representative Robert Lightizer, who is set to meet with China’s top economic official, Vice Premier Liu He. Finding an agreement before March 1st would put an end to the escalation of a trade war that has already seen tariffs placed on US$360 billion worth of goods between the two nations.

Following midlevel talks between the two countries in China earlier this month, the two sides agreed not to escalate the trade war for 90 days. After this truce period ends, the scheduled increase in tariffs is likely to cause major ripple effects throughout the US economy. Key political groups on both sides have displayed their distaste for the impacts of the trade war.

Yet major differences still remain, as the US is likely to insist that China makes significant changes to the way they conduct their business. This will include eliminating subsidies for favoured companies and cracking down on the theft of US intellectual property. The team from Beijing is only expected to offer superficial changes while committing to large-scale purchases to help lower the trade imbalance.

2. Germany Secures Access to Major Lithium Deposit in Bolivia

Germany and Bolivia on Wednesday agreed a partnership for the industrial use of lithium, a key raw material for battery cell production. The deal marks an important step towards German independence from Asian market leaders in the approaching age of electric cars.

Demand for battery metals such as lithium, cobalt and nickel is rocketing as the auto industry ramps up production of electric cars in light of stricter global emissions rules.

German Economy Minister Peter Altmaier said: “Germany should become a leading location or battery cell production. A large part of production costs is linked to raw materials,” adding that the deal was “an important building block” to securing the supply.”

Set up as a joint venture, Bolivian state company YLB will team up with Germany’s privately owned ACI Systems to develop the massive Uyuni salt flat and build a lithium hydroxide plant and a factory for electric vehicle batteries in Bolivia.

The joint venture is targeting production of up to 40,000 tons of lithium hydroxide per year from 2022, continuing over a period of 70 years.

According to Wolfgang Schmutz, CEO of ACI Group, the parent company of ACI Systems, more than 80 per cent of the lithium will be exported to Germany.

The German government has earmarked 1 billion euros to support domestic companies looking to take control of the battery production process for electric vehicles. In protecting German carmakers from dependence on Asian suppliers, the aim is also to protect jobs at risk from the shift away from combustion engines.

3. Wall or Nothing for Trump during Shutdown Negotiations

President Donald Trump admitted it is likely that he won’t be satisfied with any deal Capitol Hill negotiators come up with, saying he is likely to use his executive power to build his border wall anyway. The comments were seen as having the potential to badly undercut the compromise talks between the lawmakers.

Trump this week called the discussions between Democrats and Republicans a “waste of time” in an interview with The New York Times published on Thursday night. Stating that he has “set the stage” for what he was going to do, he implied plans to declare a national emergency and redirect money already offered by Congress towards other purposes.

Taking such an executive move will likely set off a constitutional shutdown on the legality and validity of the diversion. The President’s warning came amid few signs of progress from the ongoing talks.

House Speaker Nancy Pelosi has been playing tough, but seemed to offer Trump a solution that could see large ‘X’ shaped barriers on the border. This tried and tested tactic of creativity in drafting compromise seems to offer a face saving way out of the current shutdown, although it is not likely to be one that appeals to Trump’s core of supporters.

Polls show that a majority of Americans oppose the wall, with most people also against using a shutdown in order to force the Democrats to fund it. Some Republicans have also blamed Trump’s hardline immigration stance for the loss of some more moderate seats in the midterm elections.

4. Jeff Bezos’ Rocket Company Agrees Launch Deal with Canada’s Telesat

Blue Origin, Jeff Bezos’ space venture, has signed a deal with Canada’s Telesat to launch part of a satellite structure aimed at providing fast Internet access to global businesses and governments, the companies revealed on Thursday.

The contract marks an important step forwards for Bezos’ space venture as they aim to grab a share of the lucrative but crowded launch services market with its heavy-lift New Glenn rocket, planned to be ready by 2021.

Telesat revealed in October that it successfully conducted the first-ever live test of in-flight broadband via a satellite in low-Earth orbit. It has targets for broadband services from a constellation of nearly 300 satellites by 2022.

The companies said that Blue Origin’s rocket will be used to propel an undisclosed portion of the constellation into orbit, spread over a number of launches.

The Satellite Industry Association lobby group estimated the global market for satellite-based broadband and television services at $127.7 billion, vastly greater than the roughly $5.5 billion satellite launch services market.

Amazon founder Bezos is among a relatively recent crop of billionaire space investors seeking to disrupt the legacy launch services market with reusable rocket technology. Elon Musk’s SpaceX Starlink project is scrambling for a first launch later this year using the Falcon Heavy rocket.

5. Brexit Vote: Debate Rages Around Cash for Constituencies

MPs willing to be brought around to voting for Theresa May’s deal are holding out for government-backed boosts for their local constituencies. The increase in “transactional politics” is drawing increased public scrutiny.

It has long been known that government ministers can rely on a list of local projects costing under £1 million in order to get MPs onside during particularly difficult political moments. The grandest and most obvious current example is the government-brokered deal with the DUP, which saw a very public promise of £1 billion of spending for Northern Ireland.

Today, the government needs votes more than ever, and there at least 20 Labour MPs who are interested in being persuaded. It may be unsettling to think that an MP might have a price, however it may also be perfectly right that they use an opportunity to push for as much support as their local area can get.

On the government’s part, they can say that they are serious about showing that they are listening to the concerns of their usual rivals. This has manifested itself in real policies recently, for example the extension of rights for new parents at work.

MPs who publicly take part in such deals may be expected to face public criticism, perhaps from some of their own members and colleagues who would be loath to associate with the opposition.

Yet with more twists and turns to come, the promises that come out of these conversations could make all the difference. The opportunity may not come again.

 

Andrew Mortimer
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