First, I am thinking a new theory about the trade war trade negotiations. Suppose me and you were negotiating. You make a offer, and I reject. To be even, I make an offer and you reject it. Now we are even.

Remember Wilbur Ross negotiated a trade deal, but Trump rejected. Apparently they were close to another trade deal, but China rejected that. Now they are even and the negotiations continue.

So I think China played Trump, just to see what he was like.

Second, the problem now is that Trump got too aggressive, and there is no way back.

Suppose all the tariffs are removed in part of a deal. What will happen?

Companies were moving out of China before this trade war because of increasing cost. With the extra tariffs, this trend accelerated.

If all tariffs were removed, what will happen to those companies that moved out of China some of their production, will they return? No. They will not return. The cost are still too high, and will get higher because no more trade war and the economy expands. There is no incentive here. If the tariffs go higher, then the exchange rate adjusts nullifying its effect, maintaining market share.

Also this trade war has really put the impetus into China 2025. Before the trade war, they were working on it, very slowly. Now there is real urgency. That will be completed, whereas before it was not certain at all anytime soon.

So those two considerations, that the companies that left, will not return to China regardless of the outcome of the trade war, and how the trade war is a real boost to the China 2025 efforts, make me think that there is not a lot of incentive for China to reach a deal with the Americans.

Another development is the slowing world economy, which was a byproduct of the trade war. Now they are saying the bankers that they believe half a point of GDP will be shaved off US growth. That is far more than the decline for China. That is surprising, but that is the reality. Chinese economy is stronger.

Therefore, there is no logical way to see how the Chinese will desire to have a trade deal on any American terms. There is no leverage left for Trump.

The only wild card is that maybe Xi likes Trump and wants him to win the next election and gives him a deal. Why not. It won't really help or hurt China, but maybe Trump will do China a favour later.