Negotiators from the US and China meet in Beijing for another round of trade talks

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin will lead an American delegation to Beijing today to resume talks with Chinese counterparts.

Both sides hope to have a draft deal hammered out by next month. The issue of an enforcement mechanism, which would help either side ensure that the other complies with the stipulations of the deal, remains a major question in the minds of speculators.

The Trump administration is likely to push for maintenance of certain tariffs as leverage for Chinese compliance. An enforcement agreement might include allowing either side to reimpose sanctions if it feels the deal has been violated.

Any such enforcement mechanism that retains the spectre of sanctions would be delicate and heighten market uncertainty. With President Trump desperate for a big win ahead of the 2020 presidential elections, it is likely that he will strike a deal with Beijing in the coming months. However, any unilateral reimposition of sanctions for a perceived lack of Chinese compliance would lead to a collapse of the trade deal and could plunge US-Chinese economic relations to new lows.

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