The market holds the breath as a high-level round of trade talks, is set to start today in Washington between the Chinese delegation headed by Vice Premier Liu He and top-level Trump administration officials and is expected to last two days.
In the recent Chinese holiday, celebrating the 70th anniversary of the People's Republic of China, President Xi Jinping addressed the nation with a strong message that "No force can stop the Chinese people and the Chinese nation forging ahead." A statement that can give us a glimpse of what guidelines the Chinese delegation will move towards todays negotiations.
The White House on another hand as the trade talks got closer just increased the aggression by blacklisting 28 Chinese companies, banning visa of officials, all tied to the oppression against Muslim minorities ( a taboo on China) and threating to ban Chinese companies from having access to the U.S markets.
Those events already made the Chinese government lower the expectation over a deal, hoping then for a partial deal that can ease up the heat on tariffs. Remembering that last time, was the Chinese Vice Premier got embroiled in the failed round of trade talks in May, the Trump administration ended up raising the tariffs from 10% to 25% in Chinese goods. A major problem for the U.S in the short term it’s too don’t have leverage over China to have a real advantage in the negotiations beyond tariffs.
Trump, already announced that only a deal greater than 50/50 in favor of the U.S would work and that he doesn't mind doing a tough bargain, signaling that he isn't going to give in. Despite that, a victory in this front would be a nice boost for its 2020 election race.
However, time works in favor of China, as the elections get closer, and a better deal could be done in another administration, if not Trump most probably that it's going to be under Elizabeth Warren's administration, that has a tough way of thinking related about China but could be more flexible than Trump.
Honestly, the hopes for a full deal must come if the president's Trump e Xi meeting and discuss the subject. The market instead has been thirsty for any truce and positive new in the short term, something that seems unlikely now. For a matter of fact, if the trade talks of May were a lesson to us, we can brace for a worsing of things as an outcome.
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