Happy Monday! It is the President’s Day holiday here in the US so things are a bit quiet.

Liu He arrives in Washington Tuesday for the next round of trade talks scheduled for the 21-22. From what I hear the US side, perhaps with the exception of President Trump, is not happy with what the negotiators view as very limited concessions from China. While some sort of a framework deal and extension of the talks is likely by March 1 to avoid new and increased tariffs is still likely, I do think the Chinese and the markets may have gotten too confident that it is a done deal.

Trump agreeing to a deal that is mostly cosmetic will open him to significant bipartisan political and media attacks, and as we saw with his reaction to the December budget deal he could quickly change his mind in response to the criticism. Perhaps this week Liu will bring more substantive concessions, but do not be surprised if the Chinese are miscalculating their ability to win over Trump without actually giving much.

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