• The top-level negotiations in Washington ended with very positive statements from both sides. We see this as a sign that enough progress has been made to make a deal.
  • The next thing to look out for is high-level trade talks in Beijing in mid-February and a date for a Xi Jinping-Donald Trump meeting. Trump indicated they could even meet more than once to finalise a deal. We still see a 75% probability of a trade deal before the end of Q2, with a rising probability that it happens by the end of March.

Key takeaways from the meetings

The top-level negotiations in Washington were a key litmus test of the likelihood of reaching a deal. All the thorny issues were on the table and the negotiations kicked off in the midst of a further deterioration in the relationship as the US prosecuted the large Chinese telecoms company Huawei two days before the talks started. The first real bump in the road could easily have been reached.

However, the two days rounded up with positive statements from both sides and with US President Trump indicating that he will meet Chinese President Xi in ‘the near future’ to seal a deal. It is evident that both sides are keen to make a deal and agree that the conflict regarding Huawei should be kept on a separate track. The two days have not changed our expectation that a trade deal will be struck by the end of Q2 – and it is increasingly likely that a deal could be done by March.

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Below are some of the key points from the two days of talks.

  • Trump wants a deal sealed at a meeting with Xi in the near future. In a tweet yesterday, Trump made it clear a deal would not be signed before a meeting between Trump and Xi. Later he indicated Trump and Xi could meet more than once to finalise the deal. They could meet at end-February when Trump is scheduling a meeting with North Korean leader Kim Jong-Un and again in March to sign the final deal.
  • Both sides sent out positive statements on the two days of talks. The White House issued a statement striking a very positive tone saying the US ‘appreciates the preparation, diligence and professionalism shown throughout these meetings by Vice- Premier Liu He and his team’ and ‘the two sides showed a helpful willingness to engage on all major issues’. On the Chinese side, a statement on the state media Xinhua said ‘the talks marked a significant step in the implementation of the important consensus reached…in Buenos Aires, on 1 December’.
  • Trump’s meeting with the Chinese delegation shows the seriousness of talks. When Liu He went to Washington to talk trade in March 2018, he left the US capital without meeting Trump. Two months later negotiations broke down and he launched the trade war. This time it was different. Trump hosted a meeting in the oval office with both sides of the trade talks, which shows his full commitment to the current talks.
  • Both sides agree the Huawei case is a separate track. The US earlier this week filed charges against Huawei for breaking US sanctions and stealing technology from a US company. It caused a lot of anxiety that it would hurt the talks. However, it was again clear that both sides agree that the Huawei case should be kept on a separate track and it did not seem to interfere with the trade negotiations. It is another testament to how much both sides want to make a deal in our view.

According to the statement on Xinhua, the two parts have made a timetable and roadmap for next-step consultations. The next key thing to look out for is a possible date for a meeting between Trump and Xi. When this is announced, we believe it will be a clear sign that both sides are convinced a trade deal will be made, as it would be a major loss of face if the two Presidents met without signing such a deal. It may not come until after further trade talks in China, though. US Treasury Secretary Stephen Mnuchin and US Trade Representative Robert Lighthizer are scheduled to lead a delegation to Beijing in mid-February for further talks

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