China recently submitted a formal response to Trump's amorphous and incoherent trade demands which led some naive observers and Trump himself to say they could reach a deal in the relatively near future, but followup reports paint a different picture.
China's response includes a list of things they're willing to negotiate and a list of things they're not willing to negotiate.
According to a trade official who spoke to Reuters, the list of things China is not willing to negotiate is a deal-breaker.
The Chinese document included 142 items divided into three categories: issues the Chinese are willing to negotiate for further action, issues they are already working on and issues they consider off limits, the official said.
The items on Beijing’s non-negotiable list were unacceptable to the United States, the official said, and the overall list deserved to be looked at with skepticism in part because China has previously made pledges on economic and trade reforms that it had not fulfilled.
He cited as an example a past offer by China to loosen restrictions on U.S. ownership of Chinese companies, and said that China had subsequently failed to follow through with licenses for U.S. companies.
We don't know who the "trade official" who spoke to Reuters is, but I'm going to step out on a short limb and guess it was Trump's trade representative Robert Lighthizer.
Trump's happy talk about possibly reaching a deal with China at the G20 summit later this month led to a small rally on Wall Street last week, but we've seen this movie before. As I am writing this, the market is falling off a cliff (-544 points as of 2:30 pm).
The unnamed official who spoke to Reuters said it's implausible that Trump and Chinese President Xi Jinping will reach a substantive agreement, but we can expect to see more happy talk or an agreement to simply keep talking.
Right now we can only guess what's included on China's list of things they're not willing to negotiate, but I assume it includes at least a few things Trump has demanded that they can't give him. For example, Trump has demanded that they lower their trade deficit with the United States, but they can't do that because the deficit is driven by American consumers, not China.
The only way they could give in to that demand is by placing quotas on their exports to artificially limit the amount of goods they sell to American consumers. Trump has made similar demands to virtually all of our other trade partners including Canada, Mexico, and the European Union. So far, Trump's machinations have only increased our trade deficit, not reduced it.