China won't roll over to threat
The worst-case scenario in the trade war is that the US hikes tariffs this week, China walks away from negotiations and hits back at the US.
"The escalation of trade friction is not in the interest of the people of the two countries and the people of the word," a Chinese Commerce Ministry spokesman said via the official Xinhua News Agency earlier today. "The Chinese side deeply regrets the action. If the U.S. tariff measures are implemented, China will have to take necessary countermeasures."
China doesn't have as many options to hit back with tariffs because of the bi-lateral trade deficit but it could hit the US on IP or in some other way.
Ultimately, the market is betting that Trump and Xi will find a way to make a deal. Trump also made big threats ahead of the final NAFTA discussions only to agree to a deal that was little changed from the prior agreement.
