Big Deal or Else

“This isn’t going to be a small deal with China. This is either going to be a very big deal, or it’s going to be a deal that we’ll just postpone for a little while,” Trump told reporters at the White House, without elaborating.

China Is Counting On Trump-Xi Meeting to Settle Trade Fight

The Wall Street Journal reports China Is Counting On Trump-Xi Meeting to Settle Trade Fight

By agreeing to a meeting, some of Mr. Trump’s advisers believe the president is putting himself in a position where he will face enormous pressure not to escalate tariffs on Chinese goods from 10% now to 25% on March 2, as he has threatened. That’s because the build-up for the meeting—and the expectations of a deal—will be so high that a negative outcome would tank markets globally and batter both economies.

That is especially the case if the two leaders were to meet in China, as Chinese officials want. A decision then to raise tariffs would be a slap in the face for the Chinese leader, whom Mr. Trump regularly refers to as a friend. Instead, the pressure would be on the U.S. to reduce tariffs.

Some of Mr. Trump’s advisers are urging that he meet elsewhere with Mr. Xi, either in a third country or even at Mr. Trump’s Mar-a-Lago estate in Florida. Mr. Brilliant said he doubts a decision about the location will be made until closer to the March deadline.

“The best hope for getting a deal is a face-to face-meeting” between the two leaders, said Brookings Institution China scholar David Dollar. “The U.S. economy is decelerating and the pressure is on Trump is to make a deal.

Mr. Dollar added that even keeping the current 10% tariffs in place “would be hard for Xi Jinping to accept.

Complete Deal

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​That clearly reads complete deal by March 1, or Tariffs. However, the WSJ articlerefers to "an agreement in principle" by March 1.

Countdown Begins

In one month we will see just what Trump meant, if anything.

Of course, getting an agreement and having it respected are two different things.

Expectations

  • There will be a deal.
  • The "bigness" of the deal is in doubt both short- and long-term.
  • If the US trade deficit with China shrinks it is highly likely to go up elsewhere.
  • China might temporarily engineer a smaller trade surplus with the US for a while, then normal patterns will resume.

The notion the US trade deficit will shrink when the US has a budget deficit of $1 trillion as far as the eye can see is more than a bit questionable.

Mike "Mish" Shedlock