Trump, Xi to meet at trade war crossroads fraught with risks

By Shawn Donnan

President Donald Trump and Chinas Xi Jinping are set to meet Saturday amid hopes theyll 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 couldnt be much higher. A return to the negotiating table would end a six-week stalemate thats unnerved companies and investors, and dampen the threat of a further escalation. 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 hes made no promise to Xi not to impose any further tariffs.

Xi, meanwhile, spent much of the summits 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 Trumps “America first” trade policy, warning against “bullying practices” and adding that “any attempt to put ones own interests first and undermine others will not win any popularity.”

Any cease-fire would at least temporarily reduce fears that the worlds 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 Chinas yuan. Stocks have seesawed on each new twist in the trade tug-of-war.

In that fraught environment, even a return to negotiations wont guarantee a deal. Since the talks collapsed on May 10, Trump has raised tariffs on $200 billion of Chinese goods to 25% from 10%. In recent days, hes indicated that the next step could be a 10% tariff on all remaining imports from China — some $300 billion-worth, from smartphones to childrens clothes.

5G Battle
Another big hurdle, referenced elliptically by both leaders on Friday, is last months U.S. blacklisting of Huawei Technologies Co. on national security grounds, which threatens to cut off the Chinese giants 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 Chinas increasingly tense relationship.

China insisted this week that Huawei must be removed from the blacklist under any deal. Its an option Trump has said hed consider — but his willingness may not be enough. “Read More – Source

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