A US-China Deal Decoder

This week is almost the half-way point through the 90-day process Presidents Trump and Xi agreed to in Buenos Aires. Mid-level US officials from Washington are in Beijing for the first time since Argentina, to make progress on the agenda for when senior Chinese officials head to Washington later this month to meet US counterparts. China specialists Rhodium Group have put together a useful note that describes the elements they think will, and will not, be in a deal if one can be fashioned. The note breaks these into the following areas where the US is seeking two sets of commitments (and two sets of conditions, safeguards and verification). The first commitment is for China to buy US products to reduce the trade imbalance an the second is on structural reform, which means permanently China changing impediments to fair competition that arise from state controls over resource allocation, subsidies, industrial policies that alter commercial outcomes and other interventions. This piece provides some educated guesses on the elements of a potential deal, and suggest the negotiators this week will only make broad comments on progress, not announce any detail. The problem with that is that it will be hard to tell whether we are on track to resolving a Trade War, says Rhodium, and with just 7 weeks to go, that doesn’t leave much time to sort out the real detail and hard issues, which is where all the real dealmaking happens. There is always the possibility that the leaders will “stop the clock” or extend the negotiating period at the last minute, says Rhodium, that probability has probably increased following the US equity market turmoil of the previous month.