There are multiple signs and reasons suggesting that the Trump administration will soon reach a comprehensive trade deal with China, resulting in a market rally. Specifically, President Trump has always been a deal maker, and many of his actions as president, from his decision to block DACA in order to reach an immigration deal to his threat to scrap the Iran deal unless it’s improved, to his efforts on NAFTA, have been efforts to reach deals that improve the country’s situation, as he sees it.

In that context, the president’s decision to levy tariffs on China are likely similar to his moves on DACA. That is, he is trying to create a negative catalyst that will push the Chinese to make concessions to the U.S. and reach an overall trade deal. 

There are signs that this strategy is working. Beijing has already ” urged trade talks with the U.S. to prevent greater damage to relations,” according to Bloomberg.  In other words, China is ready to talk to the U.S. about a trade deal. Meanwhile, President Trump has already unveiled his demands on China, including “lower tariffs on cars” and a greater willingness to allow U.S. financial services companies to sell products in China. Additionally, Treasury Secretary Steven Munchin recently said that he is ” optimistic a trade agreement will be negotiated with China,” according to CNBC. “We’re having very productive conversations with (the Chinese),” CNBC also quoted Mnuchin as saying. 

The fact that China imposed tariffs against the U.S. should not be seen as precluding a trade deal from being reached. In order not to appear to be weak to the Trump administration and its own citizens, Beijing had to retaliate against Trump’s actions. However, the fact is that the Chinese are talking to the Americans, and the Trump administration has already set out its demands. Both sides  obviously would like to avert a trade war, so a deal should be attainable.