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Illustration: Lazaro Gamio/Axios

The U.S. could well have a new trade deal by tomorrow, and a trade war of staggering proportions by next week.

The big picture: President Trump has been fighting on three fronts — contentious NAFTA negotiations, tariffs on allies in Europe and Asia with the threat of more to come, and a multi-pronged standoff with Beijing. The China dispute pits the world’s two largest economies against one another, and has by far the greatest stakes for the global economy.

  • Gary Hufbauer of the Peterson Institute tells Axios that if Trump imposes fresh tariffs on $200b in Chinese goods, as Bloomberg reports he plans to as early as next week, “that will trigger a trade war with huge financial repercussions, because China will not back down.”
  • Axios contributor Bill Bishop, who recently returned from Beijing, writes: “I consistently heard that Chinese President Xi Jinping and his advisers had decided U.S. trade pressure is just one piece of a multi-dimensional strategy to ‘thwart China’s rise,’ and so it made little sense to them to offer significant concessions.”
  • Axios’ Jonathan Swan says Trump sees this as a winning issue and is not about to change course: “He believes in this. It’s like theology to him."

On NAFTA, Trump has reached a preliminary deal with Mexico, and wants Canada to come aboard by Friday so the agreement can be finalized before a new leftist government takes office in Mexico City.Where things stand: Swan is hearing some confidence in the White House and doubts on Capitol Hill, while Canadian leaders have expressed cautious optimism. It would be a remarkable turn of events to see Canada, sidelined in the talks and anxious to stand up to Trump, come around so fast.

  • Remaining sticking points include Canada’s protectionist policies on dairy and a controversial system for handling investor disputes. The U.S. has backed off nearly all its most hardline proposals.
  • All that's really needed tomorrow is a three-way handshake. The parties would then have 30 days to iron out the details and keep the process moving toward a potential ratification vote next year.
  • Behind the scenes: Swan reports that Trump is under pressure from Republican senators to get a deal — any deal — to show progress is being made. The senators, particularly those from farm states, feel Republican voters are willing to give Trump the benefit of the doubt for now, but are growing nervous.

Meanwhile, Trump today rejected an EU offer to bring all auto tariffs down to zero. The new auto tariffs he's threatening would hit Europe and Japan hard and, according to an analysis from the Peterson Institute, could cause 624,000 U.S. workers to lose their jobs and car prices to spike.

  • Trump wants to move ahead on auto tariffs but is facing strong resistance within his administration and from the Hill, Swan reports. One GOP senator told Axios “the dam would break” in Congress if Trump pulled the trigger. The senator has expressed that to Trump.
  • The fallout here would be orders of magnitude larger than what we saw over metals tariffs. “Neither Europe or Japan is going to roll over on autos the way Mexico basically has,” Hufbauer says.

Trump's view: “The European Union is almost as bad as China, just smaller."

Go deeper

4 hours ago - World

Hong Kong pro-democracy media tycoon Jimmy Lai detained on fraud charge

An activist holds a placard highlighting China's Tiananmen Square massacre as pro-democracy media tycoon Jimmy Lai arrives at West Kowloon Magistrates' Court in Hong Kong in November. Photo: Isaac Wong/SOPA Images/LightRocket via Getty Images

Hong Kong media tycoon Jimmy Lai is being detained until an April court hearing after the pro-democracy supporter was charged Thursday with fraud, per his Apple Daily news outlet.

Why it matters: The 72-year-old's arrest and denial of bail is another blow for the pro-democracy movement in the former British colony amid concerns about a fresh crackdown on activists.

7 hours ago - Politics & Policy

Inhofe loudly sets Trump straight on defense bill

Sen. Jim Inhofe speaks with reporters in the Capitol last month. Photo: Samuel Corum/Getty Images

Senator Jim Inhofe told President Trump today he'll likely fail to get two big wishes in pending defense spending legislation, bellowing into his cellphone: "This is the only chance to get our bill passed," a source who overheard part of their conversation tells Axios.

Why it matters: Republicans are ready to test whether Trump's threats of vetoing the bill, which has passed every year for more than half a century, are empty.

Conspiracy theories blow back on Trump's White House

Sidney Powell. Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

President Trump has rarely met a conspiracy theory he doesn't like, but he and other Republicans now worry the wild tales told by lawyers Sidney Powell and Lin Wood may cost them in Georgia's Senate special elections.

Why it matters: The two are telling Georgians not to vote for Republicans David Perdue and Kelly Loeffler because of a bizarre, baseless and potentially self-defeating theory: It's not worth voting because the Chinese Communist Party has rigged the voting machines.