Extending the Tariff Deadline, Moving the Goalposts

As we expected, Trump has extended the increase in tariffs beyond the March 1 deadline. We believe this is a sign of strength, a sign that Trump can get more by keeping negotiations going, and an indication that Trump has gotten non-economic concessions from Xi, perhaps on North Korea. The longer we have to wait for a deal, the longer China flirts with a disorderly first-ever recession, which would have global consequences. But waiting points to a more robust deal – already, it seems, concessions on currency manipulation that we thought were unattainable appear to have been won. The more a deal pushes China toward economic liberty and openness, the more a deal represents both a short-term and generational upside opportunity.