Since the beginning, I haven’t found any compelling reason why China would want to make major concessions to the U.S.,. I always expected that either the U.S. would accept minor concessions around making smaller the trade deficit or that there wouldn’t be a resolution to this.
Don’t forget that just a few months ago we heard from Jay Powell saying that balance sheet normalization would remain on autopilot. He changed rather dramatically. Now that we have the European Central Bank piling on, that raises questions about what’s going on. What are central banks worried about that is causing them to make rather dramatic pivots?
China is in a better place to the weather the storm and wait for the U.S. to capitulate, but China will give on lowering the trade deficit quite significantly and the U.S. will spin that as a win.