Bo Zhuang and Eleanor Olcott, economists at the consultancy TS Lombard, say the costly implications for both sides of a prolonged fight means a deal is still likely.
“Even if the tariffs remain in place, the fundamentals call for a deal. Trump will maintain talks with China, just as he has done with North Korea following the fallout from the Hanoi summit. The rising bankruptcy rate of US farmers and greater volatility in the markets will sharpen his resolve for a deal,” they say.
“Some commentators have said Beijing will now call for boycotts of US goods and place non-tariff barriers on US goods. At this stage, we believe that such harsh retaliatory measures are unlikely. This week’s events have pushed back our timeline for a deal but the conciliatory language and the measured response from Beijing is reassuring,” they add.
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