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The U.S. and China still desire a deal, but the risks now are clearly skewed toward more contentious outcomes, says Nathan Sheets, PGIM Fixed Income’s chief economist and head of global macroeconomic research.

May 13, 2019

In “The Outlook for Escalating Trade Tensions,” Nathan Sheets, PGIM Fixed Income’s chief economist and head of global macroeconomic research, recognizes that uncertainties regarding U.S.-China trade tensions have multiplied, and provides perspective based on the question of “what do we actually know?”

According to Sheets, despite escalated tensions, both sides still want to reach a deal. “China likely wants to avoid the necessity of providing more stimulus, thus further stoking debt and leverage, and President Trump wants a strong economy and a rising equity market to support his 2020 re-election bid.” However, the current stand-off may make it more difficult to get back to the negotiating table.

A personal intervention between Presidents Trump and Xi could break the logjam—even a cordial phone call would probably give the negotiations scope to get back on track. As such, Sheets’ “modal expectation is that the two sides reach agreement over the next six weeks or so—with the G20 meeting in Japan at the end of June a particularly good opportunity.” Risks, however, now skew toward “longer and more contentious outcomes.”


Read “The Outlook for Escalating Trade Tensions.” For additional detail on PGIM Fixed Income’s insights into U.S.-China negotiations, see “Implications of a U.S.-China Trade Deal: Who Wins? Who Loses?


For a media interview with Nathan Sheets, a subject matter expert on U.S.-China trade relations, or to speak about global macroeconomic conditions, please contact Claire Currie.