Unless someone backs down in a major way, this trade war is going to last for a very long time, and the Chinese have made it exceedingly clear that they are never going to back down on the core issues. So that means that the only way out is for President Trump to back down, and with an election looming in 2020, his advisers are telling him that now is the time to be very tough with China. Bernie Sanders and other top Democrats have staked out positions that are just as tough on China as Trump is being, and so if Trump backs down now he will be absolutely hammered by the other side for being weak. But if investors become fully convinced that a protracted trade war is in our future, that could be enough to set off a new financial crisis and throw the global economy into a tailspin. It definitely looked like we were headed for a major economic downturn anyway, and so this trade crisis could certainly be more than enough to push us over the edge.
In a very rare move, the Chinese have publicly revealed what it is going to take for a trade deal to happen.
According to Vice Premier Liu He, China has three key demands that must be met…
In a wide-ranging interview with Chinese media after talks in Washington ended Friday, Vice Premier Liu He said that in order to reach an agreement the U.S. must remove all extra tariffs, set targets for Chinese purchases of goods in line with real demand, and ensure that the text of the deal is "balanced" to ensure the "dignity" of both nations.