• 14 of 15 analysts do not expect a U.S.-China trade deal at the G20 summit
  • The same analysts do not expect a deal in the next 6 months
  • Say a positive meeting could lead to U.S. not raising tariffs on Jan. 1, 2019

A trade deal is unlikely between the U.S. and China when President Donald Trump meets his Chinese counterpart on the sidelines of the Group of 20 summit in Buenos Aires later this week, majority analysts polled by International Business Times said.

More important, 14 of the 15 analysts polled do not see the U.S. and China hammering out a trade deal before Dec. 31, or for that matter, within the next six months. Only one analyst expects a deal before the year-end.

But the analysts say any optimistic vibes from the meeting could lead to some positive steps on tariffs, although not an outright deal, that could keep the heat of the trade war from rising further. They see a positive meeting between Trump and Xi leading to the U.S. agreeing to hold off on raising tariffs on $200 billion of Chinese goods, from 10 percent to 25 percent, as scheduled on Jan. 1, 2019.

Yung Yu-Ma, the chief investment strategist at BMO Wealth Management, said the  “likelihood of an actual deal is very low” at the G20 Summit, adding it is more realistic to expect “some positive statements about both sides coming closer to an agreement or continuing negotiations.”

“If there are such positive statements, then probably (there is) a 60 percent chance of postponement of tariff increases while negotiations take place,” he said. “If no such positive statement, then probably only a 20 percent chance of postponement.”

Ryan Sweet, director of real-time economics at Moody’s, echoed the view. He said the two sides could reach a “partial trade agreement” at the G20 summit and “agree not to further increase tariffs while they iron out the other sticky points.”

The analysts say the standoff between the U.S. and Chinese delegations at the recently concluded Asia-Pacific Economic Cooperation (APEC) meeting has diminished the prospect of a deal at the upcoming G20 meeting. For the first time in APEC’s 25-year history, the 21 participant countries failed to come up with a joint statement because they could not arrive at a consensus over a paragraph on trade.

Luc Vallée, chief strategist at Laurentian Bank said “the probability of a short-term deal appears lower than ever. It does not mean that a deal is impossible, nor that extra tariffs by the U.S. on Chinese goods will be enacted next January. Negotiations will continue for a while and only if there is a dead-end, expect 25 percent tariffs on the entire $530 billion (Chinese) exports.”

Chief economist Brian Wesbury at First Trust Advisors is the lone analyst among the 15 who expects a deal before the year-end. But even he does not see a deal at the G20 summit because “it seems China is willing to comply with U.S. requests quietly, rather than publicly.”

Wesbury cites the tariff cuts by China and signals from the country’s authorities of more cuts to come for the optimistic view.

“The U.S. and China are closer to a deal than most market participants seem to appreciate. In this negotiation, China has more to lose (economically) than the US. And it seems the Trump Administration is not willing to back down. Put these two thoughts together and it suggests a deal is imminent,” he said.

China's finance minister Lui Kun has said  earlier this month the country will study and implement measures to further cut taxes and reduce fees as a part of its fiscal measures to support the economy amid the Sino-U.S. trade tensions.

BMO’s Yung said the more the markets come under pressure, the more both sides will seek to find common ground. He pointed out that China’s equity markets have already had a large decline and said President Trump is unlikely to welcome market turmoil as he starts shifting into campaign mode in coming quarters.

Gary Hufbauer, senior fellow at Peterson’s Institute for International Economics, said an “agreement that creates trade peace through 2020 would be a heavy lift for both Presidents Trump and Xi.”

Some analysts cite the internal divisions within the White House and the protectionist attitude of key administration members as hampering progress on a deal.

Scott J. Brown, chief economist at Raymond James, who thinks a deal is unlikely within 6 months, said: “This is partly a battle of internal divisions within the White House: (White House trade adviser) Peter Navarro and (Commerce Secretary) Wilbur Ross versus just about everybody else.”

“As with the NAFTA reboot, there are huge incentives to take whatever is offered, declare victory, and move on. Tariffs on Chinese goods are set to ramp up and broaden in early 2019, which would have a negative impact on the U.S. consumer (a bigger issue as the spring selling season gets underway). But who knows?”, Brown added.

Hugh Johnson, chief investment officer at Hugh Johnson Advisors, said: “President Trump, (U.S. Trade Representative) Robert Lighthizer along with Peter Navarro are well-entrenched protectionists and are unlikely to reach an agreement soon.”

“As we approach the 2020 election and the U.S. economy slows in 2019 and 2020, politics is likely to become increasingly more important and trade principles less important. Trump may become increasingly open to an agreement. Even though China has more to lose than the US (Chinese exports to US at $523.708 billion in 2017; US exports to China $188.004), China is unlikely to compromise anytime soon. It will be very difficult to forge an agreement,” Johnson added.

“It will take longer than 6 months to reach an agreement that constitutes a substantive change, particularly regarding intellectual capital,” Johnson said. “I am not at all confident that substantive changes could be reached under the current administrations in both the U.S. and China. We quite likely will reach agreements that will be presented as substantive, but are not.”