Global Investing Hot Spots

Mark Mobius: Asian nations' tough talk on TPP reentry by US is a bluff

Key Points
  • President Trump reportedly has signaled interest in rejoining the TPP trade deal that he bashed on the campaign trail and bailed on after being elected.
  • Partner trading nations in the deal have responded with tough talk about TPP reentry.
  • Mark Mobius, the dean of emerging markets investing, says the U.S. has a strong position.
Mark Mobius sees good growth potential in emerging markets

President Donald Trump likes a good negotiation, and he's likely to get one if the United States is serious about reentering talks with trading partners on the Trans-Pacific Partnership. Reports out of Washington, D.C., this week were that Trump has signaled a surprise openness to the TPP, a deal that he bashed on the campaign trail and, once elected, signed an executive order to abandon.

In response, some of the TPP pact nations said they won't be rushing to appease Trump.  General statements from TPP members "welcomed" the U.S. interest, but also stressed there won't be any renegotiation. Australia's trade minister told the New York Times on Friday, "We've got a deal. I can't see that all being thrown open to appease the United States."

Officials from Japan and New Zealand, also among the 11-member TPP block, were also cagey about the latest surprise from Trump.

But Mark Mobius, the dean of emerging markets investing, thinks the tough talk from TPP partners is just that — talk — and if Trump is serious about TPP reentry, the United States has a strong position to get back in on the trade deal.

Trump holds up an executive order withdrawing the U.S. from the Trans-Pacific Partnership after signing it in the Oval Office of the White House in Washington, DC, January 23, 2017.
Saul Loeb | AFP | Getty Images

"Let's face it, the U.S. is the biggest trading partner and has the biggest influence," Mobius said on CNBC on Friday. "Without the U.S. the whole thing doesn't work; it doesn't make sense. It's a net positive if the U.S. enters negotiations. ... Always better than one-off statements that shut down any chance of compromise," Mobius said.

Among the reasons stated for Trump's renewed interest is placating voters in farm states that have been hit hard by the trade war with China. Some top Democrats slammed the news as a "ridiculous reversal."

Mobius also believes the United States has a strong position in that evolving trade scenario. "Just look at the trade balance. It's way off. The U.S. has lots of negotiating bullets," he said.

Mobius said trade rhetoric about the U.S. economy being software- or service-based and, therefore, not being represented well by trade balance analysis misses the larger point: Those industries need access to the Chinese market. "A stronger trade balance is good for everyone, China included."

He added, "Let's face it, at the end of the day, the U.S. is strong on software but doesn't have full access to the Chinese market, and that's one area where there has to be negotiations to strengthen the U.S. position. Mobius also noted that the United States is a commodity producer, and getting greater access to the Chinese market for commodities could provide trade options.

"The good news is the Chinese know how to negotiate. It's one voice in China. In America it's 200. ... The Chinese will give a lot — the renminbi is getting stronger, and there are lots of little buttons they can push."

Mobius is not concerned about trade wars slowing EM growth

The emerging markets investing guru, who recently formed his own asset-management company after decades with Franklin Templeton Investments, did not express concerns about the current trade friction slowing down global growth.

He said that although the situation varies from Russia, hard-hit by sanctions, to China and Brazil, still mired in a political corruption scandal reaching to the highest levels of power, there are at least "a few innings left" for the global growth boom.

"Growth is still holding up in emerging markets. China and India are growing at 6 percent to 7 percent, and Brazil has recovered, though it's still going through the scandal, but reforms are taking place," Mobius said.

Mobius, who just visited South America, said the economy in Chile "looks great" and Argentina also continues to be strong under its new president, Mauricio Macri.

He continues to be the most positive on China and India, citing cancer treatment research in China that is "way ahead" and India, which by 2050 will have more people than China. "It's a huge market, growing at a fast pace."

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