Trump says a big China deal could come 'maybe soon.' That's unlikely.

WASHINGTON - President Donald Trump on Tuesday warned the Chinese not to wait until after the 2020 election to strike a trade deal. But the two sides remain far apart on key issues, and the possibility of a breakthrough this year remains remote.

That's the candid assessment of three people close to the talks, who spoke on the condition of anonymity to provide me their unvarnished views of the state of play between the world's two largest economies. In short, these people agreed, the two sides still have miles to go to resolve U.S. demands for major, structural change in how the Chinese government manages its economy.

And for the time being, with the Chinese economy showing signs of stress, Trump appears to feel no urgency to forge anything the administration would tout as a comprehensive agreement.

"I think there'll be a deal maybe soon, maybe before the election, or one day after the election," Trump said yesterday. "And if it's after the election, it'll be a deal like you've never seen, it'll be the greatest deal ever and China knows that." Trump said he told Chinese leaders: "If it's after the election, it's going to be far worse than what it is right now."

That said, with the two sides restarting midlevel talks this Thursday, they could strike an interim agreement - a "skinny deal" - that averts the next round of U.S. tariff escalations, and whatever countermeasures the Chinese would impose in response. Trump has already delayed dialing up tariffs on $250 billion of Chinese imports from 25 percent to 30 percent, a hike previously scheduled to bite Oct. 1 that will now take effect on Oct. 15.

But the biggest intensification of the trade war yet is set for Dec. 15, when the Trump administration has pledged to slap a 15 percent import duty on about $160 billion in new goods, most of which are consumer staples.

"There has been discussion about smaller deal that gets back to $250 billion in tariffs. They are trying to figure out what is in fact possible," one person close to the talks said. "The chances of an interim deal are reasonable, though it doesn't suit either side to talk about it."

The second person agreed: "We might see some delay on some of the tariffs, but we're certainly not going to see any reversal of tariffs unless there's a significant structural deal that addresses the issues on the table."

Indeed, both sides have shown some willingness to soften their respective approaches in recent weeks. Trump - under heavy pressure from business leaders and donors - pushed some September tariffs until December. He delayed the October tariffs, he said, to avoid interfering with the Chinese celebration of the 70th anniversary of their revolution. And Beijing last week announced it was easing tariffs on 16 U.S. products and canceling planned tariff increases on imports of American pork and soybeans.

But each side still has an armory of trade weapons aimed at the other and have also demonstrated they won't shy from deploying them. The Trump administration on Tuesday rolled out new rules that would give the government greater say in controlling foreign investment - and the ability to block China from gaining access to sensitive U.S. assets.

And it continues threatening Chinese tech giant Huawei with a ban on doing business with American companies: A second 90-day reprieve the administration granted the company will expire in mid-November. "It's a national security concern," Trump told reporters earlier this month. "Huawei is a big concern of our military, of our intelligence agencies, and we are not doing business with Huawei."

U.S. Trade Representative Robert Lighthizer - the architect of Trump's get-tough approach and a leading voice among the China hawks in the administration - told business executives Monday that the two sides remain far apart. "He laid it out by saying this is an extraordinary challenge, and when it all fell apart some months ago they were very, very close to a workable agreement," U.S. Chamber of Commerce President Tom Donohue, who hosted Lighthizer, said at a news conference Monday, per Politico's Adam Behsudi. And Donohue said Lighthizer didn't mention the possibility of an interim agreement.

Nevertheless, Chris Krueger of Cowen Washington Research Group wrote in a Monday note, "the new thrust seems to be a 'down payment' or 'interim deal' that could come with *some* tariff relief ... With his flair for the dramatic, we believe it is unlikely this 'deal' would be signed without a Trump-Xi bilateral meeting - most likely at the APEC Summit [in mid-November] in Santiago, Chile."

As for a bigger deal, Trump looks likely to hold out for major concessions on Chinese practices the administration has identified as abusive, including forced transfer of American technology, intellectual property theft, and state subsidies of favored national industries. "He believes his own rhetoric, has for a long time, and he knows a bunch of soybean purchases are not going to make anybody really happy," the second person close to the talks told me.