China's Vice-Premier Liu He (third left) speaks during a meeting with US President Donald Trump in the Oval Office of the White House. Photo: AFP / Manderl Ngan

It has become one of the longest-running geopolitical dramas during the Trump administration era, creating uncertainty and upheaval in the global markets.

On Friday, the latest installment of the trade war soap opera was played out in Washington with the negotiating teams from the United States and China deciding to extend the latest round of talks by another 48 hours.

Still, details of any concrete progress were scarce in the seven-month-old dispute, which has prompted stark warnings about the risks to the world economy.

“I think there is a very, very good chance that a deal can be made,” US President Donald Trump told the media at the White House on the second day of negotiations with Chinese officials.

“If we are doing well, I could see extending that [March 1 deadline for the end of the three-month tariff truce],” he added.

The reaction from Beijing was just as positive with the official state-run Xinhua news agency reporting:

“As the lead Chinese negotiator, [Vice-Premier] Liu He said that during the past two days, trade teams of both countries have had fruitful talks and achieved good progress in such areas as [the] balance of trade, agriculture, technology transfer, protection of intellectual property rights, and financial services.”

There were even suggestions that a summit between Trump and China’s President Xi Jinping could take place next month at The Donald’s Mar-a-Lago golf resort in Florida.

Cement a deal

In the race to cement a deal, there was also a moment of confusion during Trump’s press conference when he ended up verbally sparring with Trade Representative Robert Lighthizer, who has been a key player in the discussions.

It revolved around what to call the agreement which is still being negotiated.

Traditionally, bilateral trade deals between nations have been sealed with a memorandum of understanding, or MOU, rather than legally binding contracts because of the complex structure of legal systems around the world.

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“An MOU is a contract, it’s the way trade agreements are generally used,” Lighthizer said in response to a media question about whether the MOU being discussed between the US and China would be short or long term.

“I disagree,” Trump replied. “I think that an MOU is not a contract to the extent that we want … To me, the final contract is really the thing, Bob. To me, MOUs don’t mean anything.”

Suitably chastised, Lightheizer responded:

“From now on, we’re not using the term memorandum of understanding anymore. We’re going to use the term trade agreement. We’ll have the same document, but it’s going to be known as a trade agreement.”

How this will unfold during the next few days is open to debate.

Intellectual property theft

Beijing and Washington are still struggling to reconcile their disputes over forced US technology transfers and intellectual property theft. But, according to sources quoted by the CNBC television network, the world’s second-largest economy has committed to buying American goods worth hundreds of billions of dollars in a move to shrink last year’s record US trade deficit of $323.32 billion.

Yet crucial sticking points still remain, including Beijing’s state-subsidies model and far-reaching “structural changes.”

Another issue of contention for the US is China’s ambitious industrial strategy for global preeminence, which is embedded in Xi’s economic policy.

Uncertainty about whether any deal agreed will stand the test of time prompted Christine Lagarde, the head of the International Monetary Fund, to again warn that trade tensions were a “major risk” to world economic growth.

“I cross my fingers every morning and my toes every evening because I hope that it is going to end up with a way to fix the system, not break it,” she said earlier this week.

She is probably not alone in her daily ritual.

Read: Trade talks: Trump eyes dropping Huawei charges

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