By Bob Davis and Lingling Wei 

U.S.-China economic relations, crucial to the health of the global economy, have rarely been so much in doubt. Will a chest-thumping Trump administration push China into a trade war? Will a nationalistic Xi government spook investors, both domestic and foreign? Will the two governments get beyond macho rhetoric to find common ground? Here are five dates this year that will give important clues about the direction of the world's most important economic relationship.

Jan. 20: U.S. Presidential Inauguration Day

Writing in The Wall Street Journal in late 2015, then-presidential-candidate Donald Trump promised to designate China a currency manipulator "on day one of a Trump administration" and "trigger a series of actions" that would lead to tariffs on Chinese goods.

Will he actually pull the trigger? Many economists say there is no justification for doing so. China's yuan is no longer undervalued, they argue, and China's central bank has spent nearly $1 trillion of its foreign reserves trying to boost the currency. Some, though, say the White House could justify tariffs as a response to a decadeslong pattern of special arrangements that unfairly boost Chinese exports.

China has a number of ways to respond. It could simply sue the U.S. in the World Trade Organization. Or it could take more drastic action by letting the yuan drop even further, blocking imports, and making life miserable for U.S. companies in China.

One possibility for Mr. Trump: Do nothing until at least April 30, when the Treasury is required to evaluate foreign-exchange-rate policies.

May 26: G-7 leaders meeting in Italy

Currencies are bound to be on the agenda of the meeting in Italy of the seven industrialized powers -- the U.S., Germany, Japan, Canada, U.K., Italy and France. Fred Bergsten, founding director of the Peterson Institute for International Economics, says this would be the place for a President Trump to try to put together a global currency deal, reminiscent of the Plaza Accord of 1985, which drove down the value of the dollar.

China is already hurting from a too-strong dollar, which sucks away investment. By then, Mr. Bergsten figures, other countries will too. Mr. Trump will want a weaker dollar to boost U.S. exports.

If the industrialized nations are on board, China could ratify the deal at the G-20 leaders meeting about a month later, if not sooner. The U.S. wouldn't overtly call for a weak dollar, says Mr. Bergsten. It would talk up a "competitive dollar" instead.

June or July: Strategic and Economic Dialogue Meeting in Washington in Washington DC.

If the U.S. and China can't agree to continue the Obama-era cabinet-level talks, that would be a bad sign for relations, China experts agree. Although past meetings have been short on major accomplishments, they have revived negotiations on a bilateral investment treaty and helped the two sides better understand each other.

With Mr. Trump, there "would be a question mark over the very existence of the mechanism," said He Fan, a senior economist at Renmin University in Beijing. U.S. experts are similarly unsure whether the S&ED will survive. To keep the sessions alive, Mr. He figures, the two sides could agree to slim down the talks and focus on "major, big picture issues."

Late fall: 19th Party Communist Party Congress in Beijing

At the last session of the previous congress in 2012, Xi Jinping became Communist Party chief. About a year later, the party pledged to give the market a "decisive role" in the economy. Less noticed at the time, the party also vowed to retain its "overall leadership." Since then, economic reform has taken a back seat to party control.

In this congress, Mr. Xi is expected to further consolidate power and maybe even replace his premier, Li Keqiang, with a closer ally.

Oddly perhaps, Mr. Trump's tough stance toward China could help Mr. Xi persuade his party that he needs a stronger hand to deal with a truculent U.S. What a strengthened Xi means economically, though, is harder to tell. He could push ahead with the kinds of changes sought by the U.S., including shutting inefficient steel, aluminum and other plants whose exports batter U.S. competitors. But the opposite is also possible. A stronger Xi could also ensure the party continues to put its interests ahead of the market.

November: Asia-Pacific Economic Cooperation summit in Vietnam

If Mr. Trump makes good on his threat to scrap the Trans-Pacific Partnership, a trade deal between the U.S. and 11 Pacific Rim nations, the way is clear for China to push for its own Asia-Pacific trade deal. By default, China -- a country that Mr. Trump and others have criticized for protectionist practices -- could become the leader of trade expansion in the world's fastest-growing region.

"China wouldn't have initiatives involving significant liberalization," said David Dollar, a China scholar at the Brookings Institution. "We'd have slippage in the integration of the Asia-Pacific."

But many in Beijing look forward to China playing a bigger trade role. "As tough as it is to deal with, the Trump administration also presents a big opportunity for China," a senior government official said.

Write to Bob Davis at bob.davis@wsj.com and Lingling Wei at lingling.wei@wsj.com

(END) Dow Jones Newswires

January 16, 2017 05:14 ET (10:14 GMT)

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