“This looks like Trump exercising ‘Art of the Deal’ tactics and threatening escalation to get more out of China,” says Eleanor Olcott, China policy analyst at TS Lombard in London. “It is also a response to the negative press that has painted him as desperate for a deal leading him to drop key demands. He wants to appear tough both to the Chinese negotiators and the U.S. domestic audience,” Olcott continued in an email to Barron’s. “But this round of threats, the kind of which we haven’t seen for six months, will surely make any deal that is eventually signed appear even more uncertain and fragile. It also makes any signing of the deal between [President] Xi and Trump even more unlikely.”
But Olcott says a sea of red in markets Monday morning could lead to a change of tune since Trump wants a buoyant stock market and economy before the electoral cycle starts. Olcott still expects a deal though perhaps later than most expected. What to watch now: “The key signal now as to whether the tariffs will actually go up from 10-25% on Friday is if [Vice Premier and China’s lead trade negotiator] Liu He comes to Washington this week. If he is in town there is still time to avoid escalation.
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