As of Friday, there were no reports of any official talks with Beijing planned ahead of the July 6 deadline. White House and congressional sources say they are operating as if U.S. tariffs on Chinese goods and retaliatory Chinese tariffs will be in place next Friday, and they are warning constituents and businesses to prepare for that. The initial $34 billion would be followed by tariffs on another $16 billion in Chinese goods, and there could be more after that.

China is just one of the Trump administration's multifront trade skirmishes but it is the big one, and any developments with China that show a de-escalation would be taken as a positive by markets. Canadian tariffs on U.S. goods , in response to U.S. tariffs on steel and aluminum, go into effect on Sunday.

“It’s a big deal in that do we get a concession before we reach that point, or do we have the tariff battle? This would really kick off the back and forth,” said Peter Boockvar, CIO at Bleakley Advisory Group. "That's a wet blanket that at the same time could suppress growth and raise inflation."

Markets are on high alert for any change in course, since this next step in the trade skirmishes opens the door for more escalation. If nobody blinks, or extends the deadline, the market could be volatile. The headlines will hit trading desks that are thinly staffed for the Fourth of July week, and that could cause bigger market waves as a result of light volume.

From all appearances, the U.S. is moving ahead to put tariffs on $34 billion in Chinese goods next Friday, but in the stock market traders have been watching to see if the White House will extend the action or not. China plans to retaliate with tariffs of its own on U.S. goods and agriculture.

The stock market is waiting to see who might blink first in the week ahead — the White House or Beijing.

Treasury Secretary Steven Mnuchin said Friday that the U.S. is willing to listen if China wants to come to the table with free and fair trade, and treating U.S. companies fairly.

“Certainly, the No. 1 mover in the market right now is our perception of trade issues, and it hasn’t been great. At the same time, we have a stronger dollar beating up emerging markets and we have a Fed that seems immune to trade rhetoric. They seem to be moving ahead,” said Art Hogan, chief market strategist at B. Riley FBR.

Besides trade, the monthly jobs report next Friday is the big event for the market, which will not be open Wednesday due to the July Fourth holiday. On Monday, there is ISM manufacturing data, and monthly vehicle sales are expected Tuesday. There is also the release Thursday of the minutes from the Fed's last meeting.

In the bond market, yields were mostly lower Friday, and a flattening of the yield curve continued to raise red flags as the Fed looks set to hike rates two more times this year and investors worry trade wars will hit the global economy. Traders worry the flattening curve is signaling a weaker economy, since one that is inverted, has reliably signaled recession.

The Treasury yield is the one most driven by Fed policy, and it was higher at 2.52 percent, but the 10-year, reflecting the longer-term outlook, slipped to 2.83 percent. The gap between them was "flatter," or narrower at just 31 basis points, the lowest since 2007.

Investors in the past week sold $24.2 billion in U.S. ETFs and mutual funds, a near record pace, and moved funds into Treasury bill holdings, now at a 10-year high.

Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said he believes the move was in response to trade concerns, but he does not believe investors are panicking. Instead, they are just repositioning after a “pervasive euphoria” about the U.S. earlier this year.

“That nervousness, the losses people were experiencing in non-U.S. markets with the trade wars has probably led to what you're seeing in the markets in the last week or so — a big unwind of positioning, a flight to quality," he said.

Hartnett said he doesn’t expect a big market sell-off unless there’s a new significant negative event. “That negative development could be tariffs on European autos or tariffs on U.S. tech. They could be the Chinese currency issues resurfacing,” he said.

As for the currency, traders have been watching the yuan sink, losing ground against the dollar in 9 of the last 11 trading days. That has sparked market chatter that China could intentionally weaken its currency to help its exports during a trade war, but strategists are skeptical that would be the case.

Hartnett said for now stocks need a big negative shock to move much lower, or a big positive, like no more Fed rate hikes, to move much higher. But if the central bank does hold off for some reason, it means the stock market will probably have sold off sharply on whatever gave Fed officials enough concern to slow down their tightening.

“[The market] can rally a little bit, but you’re not going to break out of the range. When people realize that, what July could be about is selling volatility, and it will be August and September when the excitement picks up again. I think it’s also when you will be looking into 2019 and thinking about what the numbers are going to look like, and that’s easier after Labor Day,” he said. Hartnett said there could also be volatility ahead of the midterm election in November.