In the current case, after months of negotiations, the US-China trade talks are now down to the wire, with both sides playing psywar to get the upper hand as the most difficult issues are now unavoidably on the table. Both the US and China know that a new round of tariffs will not be helpful, and there is still time for a final deal, which would not surprise me in the least.
Liu He, the top Chinese negotiator is arriving momentarily in Washington, so China has not backed out of the talks. And top US negotiator Robert Lighthizer, a hardnosed trade law expert, is also leading the US team.
China, not surprisingly, tried to test the waters by changing the language in several of the seven chapter of the trade deal already written. Trump pushed back. Isn't that the nature of negotiations? China has always been tough in negotiations, and President Trump has his reputation as the best negotiator on the line.
The tariffs that are scheduled to increase to 25 percent at midnight tonight are actually weeks or months away from actually hitting, as it will presumably cover contracts signed as of tomorrow, for future delivery. So there is still room for negotiation, resolution, and a summit between President Trump and President Xi Jinping before the end of June.
There are no guarantees, but premature panic and equity selloffs are more an indication of the flighty nature of the markets than of the status of the final round of tough trade negotiations.