For the last two years, the conflict between the United States and China has dominated the economic and financial-market debate – with good reason. After threats and accusations that long predate US President Donald Trump’s election, rhetoric has given way to action. Over the past 17 months, the world’s two largest economies have become embroiled in the most serious tariff war since the early 1930s.

If financial sanctions are the next battlefield for China and the United States, the pain may be worse than tariffs.

Cutting ties would undoubtedly hurt both countries. But when wishful policies collide with the iron laws of economics, the latter are certain to prevail.

A large-scale U.S. decoupling from China cannot succeed because the global landscape of trade is complex and unable to respond to sudden shock. Relations are destined to get better, despite temporary setbacks.

China’s pig predicament communicates the complex range of priorities in US-China trade tensions: when it comes to putting pork back on people’s plates, both American and Chinese stakeholders are aligned.

The viewpoints of Washington and Beijing on technology and technology transfers are fundamentally opposed, and unless China hawks in the Trump administration accept this, the chances of a real deal will be low.

The trust deficit between China and the U.S. is resulting in irrational policies and harm to both countries’ economies. A range of mechanisms to enhance dialogue and coordination have been set up over the past 40 years. Relaunching and revitalizing these mechanisms will be essential to establishing a new, mutually beneficial model for China-U.S. co-existence.

Dealmakers always know when to cut their losses. And so it is with the self-proclaimed greatest dealmaker of them all: US President Donald Trump. Having promised a Grand Deal with China, the 13th round of bilateral trade negotiations ended on October 11 with barely a whimper, yielding a watered-down partial agreement: the “phase one” accord.

Many economists say that a major global financial crisis before the 2020 presidential election is possible. If the decision helps back away from the cliff, it may well help Trump’s chances for re-election.

Chinese and U.S. economies are highly complementary, and cooperation between them has an important bearing on the efficacy of global governance and the sustainability of global economic growth. Yet the ongoing trade war continues to do harm to both economies and to erode trust between the two nations.