INSUBCONTINENT EXCLUSIVE:
By Shawn DonnanPresident Donald Trump and China’s Xi Jinping are set to meet Saturday amid hopes they’ll hit the pause button in their
trade war and resume the search for a longer-term peace.
A temporary freeze on further U.S
tariffs, as well as Chinese retaliation, while talks get back under way has been discussed by negotiators before the leaders’ lunch at the
Group of 20 meeting in Japan, according to people briefed on the talks.
After almost a year of trade war, the stakes couldn’t be much
A return to the negotiating table would end a six-week stalemate that’s unnerved companies and investors, and dampen the threat of a
Failure to do so would likely upset financial markets already whipsawed by mounting risks to a slowing global expansion.
“We have a very
good chance” of doing “something” with China on trade at the G-20, Trump told reporters on Friday, though he said he’s made no
promise to Xi not to impose any further tariffs.
Xi, meanwhile, spent much of the summit’s first day promising to open up the Chinese
economy, and chiding -- though not naming -- the U.S
for its attack on the global trading system.
In remarks to African leaders on Friday, Xi took a not-so-subtle swipe at Trump’s “America
first” trade policy, warning against “bullying practices” and adding that “any attempt to put one’s own interests first and
undermine others’ will not win any popularity.”
Any cease-fire would at least temporarily reduce fears that the world’s two largest
economies are headed into a new cold war, though such a conflict is viewed as increasingly inevitable in both Beijing and
Washington.
Concern about the standoff has prompted investors to bet on central-bank easing, and pile into havens
Treasury yields have tumbled to their lowest level in years
The Japanese yen, a traditional beneficiary of flight to quality, has gained, while the U.S
dollar has slipped across the board, including against China’s yuan
Stocks have seesawed on each new twist in the trade tug-of-war.
In that fraught environment, even a return to negotiations won’t guarantee
Since the talks collapsed on May 10, Trump has raised tariffs on $200 billion of Chinese goods to 25% from 10%
In recent days, he’s indicated that the next step could be a 10% tariff on all remaining imports from China -- some $300 billion-worth,
from smartphones to children’s clothes.
5G BattleAnother big hurdle, referenced elliptically by both leaders on Friday, is last month’s
blacklisting of Huawei Technologies Co
on national security grounds, which threatens to cut off the Chinese giant’s access to American technology.
In a meeting on the digital
economy, Trump said the U.S
wanted to ensure that 5G networks around the world were secure
His administration has been lobbying allies around the world not to buy Huawei equipment, which the U.S
says could be used for Chinese espionage.
At the same session, Xi called out the U.S
over Huawei and said the G-20 should uphold the “completeness and vitality of global supply chains.”
“Things have escalated
enormously,’’ said Paul Blustein, a senior fellow at the Center for International Governance Innovation in Canada, and the author of
“Schism,” a forthcoming book on the U.S
and China’s increasingly tense relationship.
China insisted this week that Huawei must be removed from the blacklist under any deal
It’s an option Trump has said he’d consider -- but his willingness may not be enough
“There’s immense political pressure on him not to do that,’’ Blustein said.
All these pressures have hardened the fundamentally
different worldviews and goals in the two countries
Preliminary talks before the presidential lunch in Osaka have focused more on how to get a cease-fire than on resolving those bigger issues,
according to people briefed on them.
Trump used to cite the reduction of America’s goods-trade deficit with China -- which reached a
record $419 billion last year -- as his main aim
But his administration’s focus has shifted to limiting Chinese access to U.S
China’s government has responded with increasingly harsh rhetoric that underscores its readiness for a long battle.
Other disagreements
that caused talks to break down include how to enshrine the Chinese reforms demanded by the U.S., over intellectual property theft and
industrial subsidies, and when and how to lift the tariffs that Trump has come to view as his most powerful economic tool.
“I view tariffs
differently than a lot of other people,’’ Trump told Fox Business Network in an interview ahead of his G-20 trip
“And by the way, since tariffs have been on, our market has gone through the roof, if you know what I’m talking about."
