The next crucial date to watch for clues on where the trade war is heading may be just around the corner — way before the end of the 90-day period that U.S. President Donald Trump and Chinese President Xi Jinping have agreed on to withhold further tariffs.
China marks the 40th anniversary of its economic reforms on Dec. 18, which is an occasion Beijing could use to emphasize its commitment to transform its economy, noted Scott Kennedy, deputy director of the Freeman Chair in China Studies and director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies.
"If that day or week goes by with no major new announcements, then we know that for sure there's not a possibility that the Chinese want to use this as an opportunity to change the direction of their economy and industrial policies," Kennedy told CNBC's "Squawk Box" on Monday.
If that happens, the tariff fight between the U.S. and China will certainly re-escalate at the end of the 90-day period, he added.
Trump over the weekend agreed to not raise tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent in January as he had previous threatened, according to a White House statement. In exchange, the U.S. and China will work toward a deal within 90 days a timeline that many experts have said is too short given the complicated issues surrounding the tariff fight.
In addition to what Beijing does on or around Dec. 18, developments in Washington will also shed light on where U.S.-China relations stand, Kennedy said.
First, Kennedy said he'll watch for signs on whether the Trump administration can "get organized." Specifically, he said he'll look to whether moderates such as Treasury Secretary Steven Mnuchin and hawks like U.S. Trade Representative Robert Lighthizer start collaborating. That's important for determining how hard Washington will come down on China, according to Kennedy.
And with the Democrats taking control of the House of Representatives after last month's midterm elections, how Congress works with the Trump administration is also crucial, Kennedy said.
"What is that going to mean for pressure from Congress on the administration to get something from China," he said.
"And also in the context of USMCA: Is that going to get through? Is that going to get passed by Congress? If not, that's going to perhaps put even more pressure on the Trump administration to demand more out of China," he added, referring to the new trilateral trade deal between the U.S., Mexico and Canada to replace the North American Free Trade Agreement.
(Source : CNBC)