Constant changes in trade rhetoric have been tiring for investors at all levels, but good news this week could signal a significant shift in ongoing negotiations.

The United States and China have been locked in a bitter trade war for almost two years now. While there have been ups and downs throughout recent months, key people inside the White House now believe that a Phase One deal could be on the way.

This initial deal would not be a full and long term agreement. It would be more of a stepping stone towards future policy changes. At the very least, signing this interim deal could prevent more tariffs from affecting the markets.

Trade Officials are Optimistic About a Phase One Deal

On Monday, key figures in the trade negotiations held a telephone conference with counterparts from China. Included on the call were Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, and Chinese Vice Premier Liu He.

The officials discussed the progress of the negotiations so far, along with strategies to resolve core concerns. Discussions were reportedly positive, with some Chinese media outlets reporting that signing is right around the corner.

On the U.S. side, President Trump and his team want guarantees from China to ensure that:

• Intellectual property will be protected when foreign businesses manufacture in China.
• Barriers to foreign investment will be removed or significantly reformed.
• China should resume the purchase of U.S. agricultural goods, including soybeans and pork products.

China has its own demands. It has requested that the U.S.:

• Removes tariff barriers that have been implemented during the trade war.
• Commit to holding any pending tariff increases.

According to Politico News, a White House insider said this week that “The deal is largely there if Trump offers the substantial tariff relief that the Chinese want.”

The President clearly isn’t against holding off on future tariffs and has done so already this year. The key is that he wants to see progress and a real commitment from the Chinese side. Hong Kong protests and China’s handling of the situation has complicated negotiations. Congress passed a bill this month that will threaten Hong Kong’s trade status if China infringes on its Autonomy.

President Trump has not yet signed the bill, but he did comment on it in a recent interview. He said that trade negotiations were “going very well but at the same time we want to see it go well in Hong Kong and I think it will.”

A trade deal would likely add more fuel to the markets, which are already hitting record highs. A deal that is favorable to the United States would also make good on President Trump’s campaign promise to address unfair trade conditions.

The outcome of this entire saga could prove critical in the upcoming presidential election.