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Trade war update: U.S. and China hold talks in Beijing

The U.S. and China held deputy-level trade talks in Beijing prior this week. The discussions lasted one day longer than arranged and the two sides issued obscure yet somewhat positive authority articulations about the discourses.

My idea bubble: The Chinese do need to make a deal, both in light of the fact that the trade conflict is exacerbating underlying issues in their economy and furthermore in light of the fact that I hear Xi is quite concerned about the possibility of U.S. decoupling from China, particularly in innovation.

In any case, the Chinese side can not acquiesce to all US requests without making structural changes that could represent an existential test to the Party’s perspective of how the monetary framework should be organized, so regardless of whether there is eventually a deal will boil down to what amount is sufficient from the Chinese side to get the President Trump to state “we have a deal.”

What’s straightaway: The Wall Street Journal has confirmed that Vice Premier Liu He, China’s lead negotiator, will come to Washington, D.C. to proceed with the negotiations.

“Vice Premier Liu He is planning to meet with his U.S. counterparts including U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin for negotiations on Jan. 30 and Jan. 31, according to people briefed on the matter. These people caution that the plan could be delayed by the partial U.S. government shutdown.”

The bottom line: I expect that the Chinese offer will fall far short of what U.S. trade Representative Robert Lighthizer needs, yet utilizing a mixture of huge purchase commitments, unofficial lobbying, flattery and headline concessions, it will ultimately prove enough for Trump.

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