At the NATO summit in London Tuesday, President Trump was asked about the ongoing trade negotiations with China. True to form, Trump, pulled no punches. When asked “So you don’t really have a deadline?” Trump responded, “I have no deadline, no. In some ways, I think it’s better to wait after the election with China. But I’m not going to say that.” The problem is he did say that and markets took his words seriously. He added, “In some ways, I like the idea of waiting until after the election for the China deal, but they want to make a deal now and we will see whether or not the deal is going to be right.” The S&P 500, Nasdaq, and Dow were all down near 2% on Tuesday in reaction to Trump’s warning.

Markets sold-off broadly Tuesday as the Dec. 15 deadline for a trade-deal looms closer. On the 15th, the U.S. raises tariffs on hundreds of billions of dollars of Chinese imports. This has forced U.S. companies scrambling to find alternatives in other countries and Chinese factories have already begun moving overseas. Waiting for the last minute hoping for a deal doesn’t make much business sense and even if the U.S. and China do reach a deal the damage will be felt years from now.

Trump campaigned on fixing the U.S.-China trade imbalance, currently a ratio of five to one in favor of China. “Fixing” the imbalance in terms of evening things out would be practically impossible but at least decreasing it substantially appears to be Trump’s goal. The only way it can be decreased would be for Trump to increase tariffs on Chinese goods and the Chinese would have to devalue their currency so that their exports would still be competitive for the American consumer. This appears to be a foregone conclusion at this point. Short of devaluing its currency the Chinese have little way out in terms of hanging on to the half-trillion-dollar exports to the U.S.

The U.S. Justice Department has begun discussing freezing Chinese companies out of the U.S. banking system as well as sanctions in response to China's treatment of Uighurs and Hong Kong protestors. The timing of these announcements is of course suspect and shows the Trump administration is really forcing China’s hand in trade negotiations. The plight of the Uighurs has been ongoing for many years now, why the sudden interest from Washington?

Whatever the end result, a China-U.S. trade deal would benefit the U.S. and global economy nearly as much as it would benefit China. Most of the products China produces can’t easily be sourced elsewhere meaning the American consumer would pay a “tariff” whether they purchased goods from China or not. I predict a resolution before Dec. 15 and I predict the Chinese yuan to devalue to 8 yuan to the dollar before the year 2020 is out.