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After waging an increasingly intense trade war against China for months, it looks like President Donald Trump is ready to reverse his uncompromising stance just in time for a meeting with Chinese President Xi Jinping.
Trump and his administration have taken a more moderate tone towards China in recent weeks, on the eve of the G20 summit meeting to be held in Argentina at the end of November.
Talks between the United States and China have resumed and some of the most hawkish members of the Trump economic team have indeed been sidelined.
Analysts say this change shows a willingness to reach an agreement with Beijing.
Discussions relax trade.
It has now been more than four months since the United States and China imposed reciprocal tariffs on their products. Up to now, badets worth $ 360 billion are now subject to customs duties.
But after months of difficult discussions, several members of the Trump administration – even the president himself – began to suggest a possible deal.
The most significant sign that the United States and China could actually reach an agreement came late on Wednesday, after reports were received that Beijing sent a letter to the Trump administration describing the possible concessions.
The letter comes when the Chinese authorities have resumed trade talks with their counterparts in Washington. Trump and Xi held an official phone call on November 1 – the first substantial contact between the two leaders for weeks.
And the internal dynamics of Trump's economic team also seems to favor the progress of an agreement.
Peter Navarro – Trump's ultra-protectionist commercial advisor, also the author of "Death By China" – would have been put out of future discussions between Xi and Trump. following his inflammatory comments attacking Wall Street for being self-mixed with American-Chinese discussions.
"There are so many disputes between the two countries that it will take several months to reach a final agreement, but the reports of last night – and the apparent demotion of Navarro – are positive developments. , in our opinion, "said Greg Valliere. Chief Strategist for Horizon Investment, said Thursday.
Griefs inspire the talks?
The administration did not explain the reason for the sudden change in Trump's business strategy, claiming only that the president had always wanted an agreement. But recent political and economic successes may indicate the cause.
The GOP was defeated in the US House of Representatives elections in what was considered, at least in part, as a repudiation of Trump. Although some observers thought the loss could ignite a fire under the president to push the trade war to the next level, this might have had the opposite effect.
It's unclear what effect the trade war has had on key races – according to the Wall Street Journal, the GOP has won 10 of the 19 competitive House races with soybean production of over 2 million bushels – but Exit surveys have shown that 29% of voters think tariffs are hurting their local economy, while 37% say it has no impact.
Some badysts have also observed that the strength of the economy helped to at least mitigate some of the "blue wave" of Democrats and that any long-term economic damage resulting from a long-running trade war could undermine Trump's most powerful argument from 2020. [19659020] Jim Young / Reuters
Several disturbing economic songs could have also pushed Trump toward a potential deal:
A Relaxation It's not a Taken Fact
However, Michael Zezas, head of US public policy research at Morgan Stanley, warned on Thursday that a further escalation of the trade dispute was still the most likely scenario coming out of the G20 meeting.
"To reiterate: the increasingly constructive tone probably hides fundamental and persistent disagreements beneath the surface," wrote Zezas. "Therefore, our basic scenario remains that escalating trade tensions will continue."
From Zezas' point of view, the Trump Administration has been attacking China – but not tariffs – in recent weeks. For example, the Ministry of Justice has filed lawsuits against a large number of Chinese companies suspected of economic espionage during the past month and has set up a task force to combat these practices.
The unpredictability of Trump in international contexts also has the chance to break any goodwill. As noted by Chris Krueger, strategist at the Cowen Washington Research Group, Trump does not have the best track record of international meetings.
"It is somewhat surreal to say, but this meeting will be heavily influenced by Trump's mood and his previous performances at foreign multilateral summits (G7, NATO and Paris trip the week last) have a bad transaction history (quite the opposite), "said Krueger Thursday.
The trade war can still worsen.
Trump threatened to touch the remaining $ 257 billion of Chinese products not caught in the tariff dispute – and the 10% tariff on the $ 200 billion of currently restricted Chinese products should rise to 25% January 1st.
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