China’s troubling economic downturn, the steepest in three decades, has refocused on the fate of trade talks with the United States and the chances of tariff cuts as both sides look to end more than a year of trade and political hostilities.

The world’s second-largest economy grew 6% in the three months ended September, the Bureau of statistics said Friday, and while that’s a level at which every developed country in the world would be proud to disclose, for China it’s the slowest since 1992.

It could also be a significant equalizer in trade talks with Washington, given previous speculation that China is willing to take a firmer stance on tariffs and related issues, while President Donald trump remains entangled with countless impeachment and ethics investigations, as well as the demands of next year’s election cycle.

“The private sector will continue to suffer from a decline in manufacturing activity due to US tariffs,” said ING economist iris pang. – This will further increase uncertainty in terms of job security and wage growth, which in turn will put pressure on consumption, even if substantial public sector growth acts to counter these negative pressures.”

Pang argues, however, that China has more than 1 trillion yuan to unleash on infrastructure projects, which remain a huge contributor to overall GDP, and noted that China’s fixed investment growth rate has stabilized at about 5.4%, indicating the government has not completely turned off spending taps.

But while China is not nearly the export-dependent economy that most casual observers assume – nearly two-thirds of its growth comes from consumption – it simply cannot argue that tariffs and trade disputes with the United States have hit the nation hard.

China’s net exports in September fell 3.2 percent from a year ago, the Bureau of statistics reported last week, and accounted for just under 20 percent of GDP in the third quarter. At the same time, factory activity slowed for five straight months, and August industrial production fell to its weakest pace in more than seventeen years.

Trump and Chinese President XI Jinping will meet next month at the APEC summit in Chile, and both sides hope the text of last week’s trade agreement will be ready for the pair to sign.

However, with tariffs on $ 550 billion in Chinese-made goods already in place, and charges on key consumer goods set to hit in December 15, investors don’t expect much of a market reaction to “mini-deals” based on agricultural purchases in China and a vague commitment from trump to play well in the future.

So who blinks first? The answer may be neither one nor the other.

The impeachment case against trump is proceeding apace, and while he has bipartisan support for his “hard-line approach to China,” he is unlikely to turn the screws any harder in the coming months as it would threaten his key presidential achievement; a roaring stock market.

However, if he gets his way with the Federal reserve, which he has accused of slowly kicking on rate cuts as the economy cools, he could still get the record highs he hopes to headline in next year’s election.

China, meanwhile, may wish to leave the trump era and take its chances with the new administration, but as TheStreet’s founder, Jim Kramer, has noted many times, neither Joe Biden nor Elizabeth Warren is likely to treat Beijing kindly on trade, given XI’s record, given XI’s record of human rights, worker protection and regional security.

Which brings us back to growth. The slowing economy is shedding jobs, and while China’s (widely unappreciated) unemployment rate has held near the 4% mark for decades, analysts note that the country’s nearly 300 million migrant workers, concentrated around major Metropolitan areas, are rarely captured in official statistics.

The prospect of sub-6% growth, slowing exports and an ongoing blacklist of its largest technology companies, which hampers the country’s ability to deploy its unfinished 5G network, could persuade China to abandon some of its hard lines on trade and strike a deal with trump that gets some tariff relief and normalizes relations between the world’s two largest economies.

But it seems more likely to force China to look inward, with a focus on spending in stimulus, as opposed to addressing structural issues – such as subsidies for state-owned enterprises – that U.S. officials have been pursuing them about for years.

“China calls on the US to abandon all tariffs to end the trade war. However, the US insists the tariffs remain in place until the second phase of the deal is completed, meaning China must commit to “more substantial structural changes,” said Daiwa Capital Markets analyst Kevin Lai. “So there is a fair possibility that both sides could opt out of the deal before President trump and President XI plan to sign it at the APEC summit in Chile.”

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