Trade truce or not, a protracted Cold War-like conflict between the United States and China has already begun. That should worry the US, which, unlike China, is devoid of a long-term strategic framework.

NEW HAVEN – For the last two years, the conflict between the United States and China has dominated the economic and financial-market debate – with good reason. After threats and accusations that long predate US President Donald Trump’s election, rhetoric has given way to action. Over the past 17 months, the world’s two largest economies have become embroiled in the most serious tariff war since the early 1930s. And the weaponization of US trade policy to target perceived company-specific threats such as Huawei has broadened the front in this battle.

I am as guilty as anyone of fixating on every twist and turn of this epic struggle between the world’s two economic heavyweights. From the start, it has been a political conflict fought with economic weapons and is likely to remain so for the foreseeable future. What that means, of course, is that the economic and financial-market outlook basically hinges on the political dynamic between the United States and China.

In that vein, the so-called phase one “skinny” trade deal announced with great fanfare on October 11 may be an important political signal. While the deal, if ever consummated, will have next to no material economic impact, it provides a strong hint that Trump has finally had enough of this trade war. Consumed by domestic political concerns – especially impeachment and the looming 2020 election – it is in Trump’s interest to declare victory and attempt to capitalize on it to counter his problems at home.

China, for its part, would also like nothing more than to end the trade war. Politics is obviously very different in a one-party state, but the Chinese leadership is not about to capitulate on its core principles of sovereignty and its aspirational mid-century goals of rejuvenation, growth, and development. At the same time, there can be no mistaking downward pressures on the economy. But with Chinese policymakers determined to stay the course of their three-year deleveraging campaign – an important self-inflicted source of the current slowdown – they should be all the more eager to address the trade-related pressures brought about by the conflict with the US.

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