The US and China, embroiled in an ongoing and oft-escalating trade war, may come to an agreement at the week's Group of 20 meeting, but details and concessions likely will be scarce, Scotiabank analysts said in a report on Wednesday.
Negotiators from both countries -- the world's two largest economies -- have "strong" incentive to move forward with talks and prevent further escalation of the trade dispute, the bank said. While common ground may be found, trade tensions likely will remain for the foreseeable future.
Attention is on the proposed meeting between presidents Trump and Xi Jinping that's scheduled for Dec. 1, following the conclusion of the G20 Leaders Summit in Buenos Aires.
Tensions between the countries that appeared to have cooled heated back up again in recent weeks after China sent a trade proposal to Washington that reportedly wasn't deemed acceptable, and the US Trade Representative's office issued a report saying China hadn't backed off its "unfair" trade practices and theft of intellectual property, an allegation Beijing denies.
Trump said in a Wall Street Journal article this week that he is considering a tariff on iPhones and laptops imported from China, and said he will move forward with a proposal to increase tariffs from 10% to 25% starting Jan. 1 if a deal isn't reached.
The dispute between the countries has started to adversely affect both countries as tariffs now cover about $360 billion of bilateral trade, which cover 55% of the flow of goods between the US and China, Scotiabank said.
"We are cautiously optimistic that China and the US will soon reach a basic high-level agreement -- potentially even at the end of this week -- that would stabilize the trade conflict at the current juncture," the bank's analysts said. "Nevertheless, prior to achieving such an outcome, trade-related protectionist rhetoric from the US administration will likely be rather aggressive, in line with President Trump's proven negotiating style."
China likely will concede little but enough to allow Trump to "claim a victorious turn." Scotiabank said. That's what happened with the US-Mexico-Canada Agreement, dubbed USMCA, as Mexico and Canada actually offered few revisions but enough to appease the US president.
"From China's point of view, the trade dispute is putting the economy under downward pressure, encouraging the Chinese administration to push for a near-term resolution," the bank said. "Moreover, offering the US some concessions, such as a promise to reform its intellectual property rights framework or to ease access for foreign firms, should not be a deal-breaker; in fact, we believe that such reforms are necessary irrespective of pressure from the US if China wants to successfully advance its official industrial strategy and become a global technology powerhouse by 2025."
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