US-China Trade Talks: Why Things Are Getting Tricky

Published 06/04/2018, 08:57 AM

Unfortunately, the positive developments in the US-China trade conflict did not last long. The risk of going into renewed escalation over the coming weeks is going up.

The key challenge is how Trump can both satisfy a strong domestic call for tariffs on Chinese technology without China leaving the negotiation table and go back to retaliation.

While we still believe the ultimate solution will not entail a trade war, the probability that things will get worse in the short run is clearly going up. In addition, it highlights that this theme will continue probably for a long time. Keep an eye on China's response on 15 June when Trump plans to announce the specific list of targeted goods for USD50bn of Chinese imports.

A return to a 'tit-for-tat' pattern would increase the fear of a trade war and probably give a hit to risk appetite.

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