Reports Suggest China Trade Deal Approaching Final Stages, but Hard Line Negotiators Remain Cautious

If Friday’s Bloomberg report is true then the U.S. and China are edging toward a final trade deal that President Donald Trump and Chinese leader Xi Jinping could sign in week, sources familiar with the matter said. However, the hawks in Washington, or those who want more concessions, are urging caution on agreeing to a deal prematurely.

The optimistic tone of the article came as a surprise because earlier in the week, U.S. Trade Representative Robert Lighthizer told lawmakers that more work needs to be done and said the administration won’t accept a deal that doesn’t include significant “structural” changes to China’s state-driven economy. Lighthizer also stressed the need for an enforcement mechanism, allowing the U.S. to take unilateral action if China breaks the rules.

Lighthizer is described as one of the more hawkish advisers among Trump’s trade team. His comments bring an air of caution to the situation. Nonetheless, the rise in Treasury yields and increased demand for risky assets suggests investors may be taking his comments with a grain of salt.

What’s the Hurry?

According to one of the sources, who spoke on condition of anonymity because the preparations are confidential, the United States wants to hold a summit between the two leaders as soon as mid-March. However, surprisingly, the Chinese are having some trouble with the timing because Xi is expected to lead China’s annual National People’s Congress in early March, as well as make other scheduled foreign trips.

It’s Trump’s Call

Although a White House spokesman didn’t immediately respond to Bloomberg’s request for comment, almost all U.S. officials agree that Trump will have the final call on any agreement. Trump has been optimistic about getting a deal completed in a timely manner, even extending the March 1 deadline for additional tariffs. However, he’s a negotiator and a businessman, and will not hesitate to walk away if the proposed deal smells bad.

Just last week, Trump abruptly said good-bye to Kim Jong Un at the U.S.-North Korean nuclear summit in Vietnam, when the U.S. President refused to lift sanctions on the country, he said. Recently, he even said he’d be willing to walk away from a deal with China that doesn’t meet his standards.

“Speaking of China we’re very well on our way to doing something special. But we’ll see,” Trump said at a press conference in Hanoi on Thursday. “I am always prepared to walk. I’m never afraid to walk from a deal, and I would do that with China, too, if it didn’t work out.”

Wall Street Journal Has Similar Spin

On Sunday, the Wall Street Journal reported that the U.S. and China are “in the final stage of completing a trade deal,” with Beijing offering to lower tariffs on U.S. products in categories ranging from chemicals to autos. For its part, the U.S. is considering eliminating most, if not all, of the trade sanctions placed on Chinese goods last year, according to the Journal.

Problems With the Details

The good news is that the two sides could reach an agreement. However, some are saying don’t jump to bullish conclusions until the details of the deal are released. The lifting of tariffs is welcome news, but some would like to know what is being done about China’s strategy to protect is own technological development in certain high-tech sectors. Furthermore, investors want to know if China will make concessions over intellectual property.