Perspectives: U.S. - China: An Important Reset in Tone

Perspectives: U.S. - China: An Important Reset in Tone

Today's progress in the U.S.-China trade talks represents an important reset in the tone of bilateral relations. There is no guarantee that both sides can agree on the details before President Trump and President Xi meet next month in Chile, but the shift in Trump's attitude is very significant in an administration where the president's feelings are more important than the substantive issues in front of negotiators. I'm optimistic that a formal deal can be concluded next month. That would create the opportunity for reducing bilateral tensions across a wide range of issues, from technology to investment.

“We just made one of the biggest deals of all time,” Trump declared. Although details of the 'deal' will have to be finalized before he meets with Xi in mid-November, Trump said that “It will be the largest deal ever made for farmers.” And, the president added, “We have an agreement on intellectual property.”

According to press reports, Trump said that while there has been “a lot of friction between the U.S. and China, now it's a lovefest.” Trump added that he has “lots of respect for President Xi.” 

Ahead of his Oval Office meeting with Vice Premier Liu He, Trump tweeted that there are “warmer feelings than in recent past, more like the Old Days...All would like to see something significant happen!”

Trump rarely comments on relations with China outside of trade issues, but today he said that a deal would help lead to “world peace.”

Trump also spoke in positive terms about the turmoil in Hong Kong: “I think great progress has been made by China in Hong Kong. And I've been watching, and I actually told the Vice Premier, it really has toned down a lot from the initial days. . . I think that's going to take care of itself.”

We haven't seen any details of the trade 'deal,' and it is always possible that Trump could sour on it before he gets to Chile, but in my view the odds are good that today's “lovefest” will lead to a formal deal next month, because I think the president has decided that a deal is much better than no deal for his re-election prospects.

Andy Rothman
Investment Strategist
Matthews Asia
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