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WASHINGTON (AP) — A deal seemed so close.

As recently as May, the Trump administration and China seemed on the verge of resolving their dispute over Beijing’s combative trade policies.

Then it all collapsed. A cease-fire, declared by Presidents Donald Trump and Xi Jinping in June, failed to stick.

Now, global financial markets are shaking and central banks across the world are trying to cushion their economies from the worst by slashing interest rates — all in the expectation that a trade war between the world’s two biggest economies will continue to rage, probably through the 2020 U.S. presidential election.

“The U.S.-China trade talks are in serious trouble,” said Wendy Cutler, a former U.S. trade negotiator who is now vice president at the Asia Society Policy Institute. “There is less and less trust on both sides, coupled with a growing sense in both Washington and Beijing that they may be better off without a deal, at least for the time being.”

The past week has been especially rocky. A week ago, Trump abruptly announced that starting Sept. 1, he would impose tariffs on the remaining $300 billion in Chinese imports that he’s so far spared. On Monday, Beijing struck back: It halted purchases of U.S. farm products — a blow to a critical Trump political base in the Midwest — and let its currency sink to its lowest level in 11 years. A lower-valued Chinese currency, the yuan, gives its exporters a competitive edge over foreign rivals.

Beijing’s currency move led the U.S. Treasury Department to declare China a currency manipulator for the first time since 1994. That step could eventually pave the way for additional sanctions. But for now, it stands mainly as a symbol of the increasingly rancorous feud between Washington and Beijing.

“Both sides are retrenching,” said Timothy Keeler, a former chief of staff at the Office of the U.S. Trade Representative and now a partner at the law firm Mayer Brown.”

The prospect that the U.S.-China trade war will go on indefinitely poses a serious threat to a global economy that was already weakening. It rattles financial markets, discourages trade and paralyzes businesses that must decide where to situate factories, buy supplies and sell products. When companies caught in the crossfire put such plans on hold, they collectively depress trade and growth. The International Monetary Fund expects world trade to slow in 2019 for a second straight year.