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After waging an increasing escalating trade war against China, it appears that President Donald Trump may be ready to back down on his hardline stance – just in time for a meeting with Chinese President Xi Jinping.
Trump and his administration have taken a tone towards China in recent weeks, leading up to the meeting at the G20 summit in Argentina at the end of November.
Talks between the US and China have restarted, and some of the more important members of the Trump's economic team have been effectively sidelined.
Analysts say the shift shows a possible willingness to strike a deal with Beijing.
Talks thaw trade tiff
It has been over the years since the US and China began to impose tariffs on each other's goods. So far, $ 360 billion worth has now been subject to duties.
But after months of tough talk, multiple members of the trump administration – even the president himself- have started to suggest a possible deal.
The most significant sign that the US and China may actually come into the bargain Wednesday, after reports surfaced that Beijing feels a letter to the Trump administration outlining possible concessions.
The letter comes back from Washington, DC Trump and Xi held a formal call on November 1 – the first substantial contact between the two leaders in weeks.
And the internal dynamics within Trump's economic team also seem to progress on a deal.
Peter Navarro- Trump's uber-protectionist trade adviser who also is the author of "Death By China" – was r eportedly sidelined for the upcoming talks between Xi and Trump following inflammatory comments attacking Wall Street for allegedly meddling in the US-China talks.
"There are so many disputes between the two countries that it will be a final deal, but last night's reports – and the apparent demotion of Navarro – are positive developments, in our opinion," Greg Valliere, chief global strategist at Horizon Investment, said Thursday.
Stumbles inspire talks?
The administration has not outlined the reason behind the sudden shift in Trump's trade strategy, saying that the president has always wanted a deal. But political and economic hits of late may point to the cause.
The GOP was thumped in US House of Representatives elections, at least in part, as a repudiation of Trump. Whereas the observers thought that the loss may be a threat, it may have had the opposite effect.
It's unclear just how much of an impact the world has had on key races – according to The Wall Street Journal, the GOP won 10 of 19 competitive house races with soybean production of over 2 million bushels – goal exit polling showed that 29% of voters Thought the tariffs hurt their local economy, while 37% said it had no impact.
Some analysts also observed that the economy was helping some of the Democrats' "blue wave," and any long-term economic damage from a drawn-out trade war could undermine Trump's strong argument going into 2020.
Several worrying economic sings could also have pushed Trump toward a potential deal:
A détente is not a done deal
However, Michael Zezas, head of US public policy research at Morgan Stanley, cautioned that further escalation of the trade is still more likely to occur in the G20 meeting.
"To reiterate: The constructive is ongoing, fundamental cuts beneath the surface," Zezas wrote. "Hence, our base case remains that escalation of trade tensions will continue."
To Zezas's point, the trump administration has been going after China – just not through tariffs – over the past few weeks. For example, the Department of Justice has brought charges against a slew of Chinese firms for alleged economic reasons.
Trump's unpredictability in international settings also has the chance to throw a wrench into any good will. As noted by Chris Krueger, a strategist at the Cowen Washington Research Group, Trump does not have the best track record when it comes to international meetings.
"It is somewhat surreal to state, but this meeting will be hugely influenced by the past (G7, NATO, Paris trip last week), have poor records of dealmaking (quite the opposite)," Krueger said Thursday.
There is a lot of room for the trade war to get worse.
$ 257 trillion worth of Chinese goods worth $ 257 trillion worth of Chinese goods nowadays.
