For the first time since he entered the White House, the world will get a glimpse of how President Donald Trump really deals with the sticky issues of trade when he meets Chinese President Xi Jinping.
Making American trade fair was a cornerstone of Trump's presidential campaign, but so far, it's been an intangible for markets. That may soon change.
Trump hosts Xi at Mar-a-Lago Thursday and Friday, and even the exchanges and interplay between the two leaders on Trump's private Florida resort could send an important signal on where his administration plans to take the difficult trade relationship with China.
"The markets want to see that the president's efforts to prepare for tariffs are just mainly a negotiating ploy, and not a serious pre-commitment. If President Trump's already made up his mind that he's going to hit China with big tariffs, the market wants to know that now," said Paul Christopher, Wells Fargo Investment Institute chief international investment strategist.
Ahead of the meeting, Trump has already tweeted that it will not be easy. "The meeting next week with China will be a very difficult one in that we can no longer have massive trade deficits ... and job losses. American companies must be prepared to look at other alternatives."
Candidate Trump threatened tariffs and called out countries that he claimed are unfair to the U.S., including Mexico and China. In the background, markets have feared, but not reacted to the idea that his comments could create retaliatory trade clashes and harm the economy.
How far he is willing to go has remained unknown, even as his administration moves forward to renegotiate the North American Free Trade Agreement with Mexico and Canada. He tasked Commerce Secretary Wilbur Ross to look at practices behind U.S. trade deficits.
"I think what markets care most about is stability in China. As long as President Trump doesn't disrupt that, which I don't think he'll do, or disrupt Chinese buying of Treasury bonds, markets will handle it quite well," said Erin Browne, portfolio manager and head of macro investing at UBS Asset Management's hedge fund unit, UBS O'Connor.