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National Bank of Canada analysts point out that, while a trade deal between China and the United States would be good news for the markets in the short term, it would not change the long-term fundamentals, fuelling tensions between the two countries.

Key quotes:

“This includes the battle for geopolitical influence and dominance of tomorrow’s technologies.”

“This dynamic is reinforced by a healthy dose of mutual distrust. On the one hand, the United States suspects that China’s ultimate aim is to steal U.S. technology and to replace the United States as Asia’s preeminent geopolitical power. On the other hand, China feels that the United States is seeking not only to gain greater access to the Chinese market but also to constrain China’s rise as a global power.”

The recent breakdown in trade talks further exposes the divide between these duelling narratives. China sees U.S. demands that it change its laws and agree to intrusive monitoring as an infringement of its sovereignty, while the United States sees China’s refusal to specify in writing how it will amend its laws as an indication that China is not intending to keep its promises.”