Reports have been coming in for the past week that China and the US are close to a revised trade deal. Remember, trading with China isn’t a new thing. We’ve been trading with China for years. What’s new is that the President has levied about $250 billion in tariffs throughout 2018 China in an attempt to get them to trade their trade policies. China responded with modest, targeted tariffs of their own, but largely the flow of international trade has been stable. Some items on the US wish list include a lower trade-deficit, better intellectual copyright protection, and the ability to open China to competitors; we know less about what is on China’s wish list for a new trade deal.
Ironically, if there has been any effect at all from the tariffs and trade, it is in US prices. The 4th quarter saw prices rise by nearly 3%. As a result, the Federal Reserve has communicated their willingness to continue monetary tightening, which directly undercuts the administration’s will.
Now that the negotiations appear to be close to complete, we’ll finally get a chance to see if any meaningful changes have occurred after all this antagonism. Several analysts and reports suggest that the rollback of tariffs and engagement between both nations will be limited, sequential, and conducted over multiple stages to encourage adherence to the contract. If it’s anything like the revised NAFTA deal between Mexico and the United States, this entire affair may have been much ado about nothing.