(Nikkei) Trump and Xi eye next summit as trade war roils markets

(Nikkei) US-China officials meet Monday in Beijing to flesh out compromises

A police officer rolls back a fence in front of the Great Hall of the People in Beijing, China. A U.S. government delegation arrives on Monday for trade talks.   © Reuters

WASHINGTON/BEIJING — U.S. President Donald Trump and Chinese President Xi Jinping are weighing the possibility of another face-to-face meeting in the first half of 2019, sources say, if progress can be made in the trade talks that begin Monday in Beijing.

The talks come after a turbulent first week of the year, which saw stock markets across the world fall sharply in response to weak economic data, but also recover in some markets on hints of positive news. Both Trump and Xi are concerned about the trade war’s impact on their economies and will be looking for a way to break the impasse.

“The China talks are going very well,” Trump told reporters on Sunday at the White House, when asked about the upcoming talks in Beijing. “I really believe they want to make a deal,” he said, noting that the weakness in China’s economy “gives them a great incentive to negotiate.”

Monday’s talks will be the first direct negotiations between the two sides on trade since Trump and Xi met for dinner in Argentina on Dec. 1. The U.S. delegation will include Deputy U.S. Trade Representative Jeffrey Gerrish and David Malpass, undersecretary for international affairs at the Treasury Department.

China offered to import an additional $1.2 trillion worth of American products at the Trump-Xi dinner last month. The agenda for Monday’s meeting will include deciding what products China will import more of.

If progress is made in the talks, China will send Vice Premier Liu He to the U.S. later this month for more in-depth discussion of issues that the two sides have been far apart on, such as intellectual property, according to sources. The two countries have started coordinating another summit in the event that they make some headway, which will involve Xi visiting the U.S. as early as the first half of this year. 

The South China Morning Post reported that Trump may meet with Chinese Vice President Wang Qishan at the annual World Economic Forum in Davos, Switzerland, later this month. The Chinese side is said to be seeking a solution to the bruising trade war through direct talks with Trump, given the U.S. president’s fondness for negotiating deals.

The two leaders called a cease-fire last month, agreeing to hold off on imposing more tariffs for 90 days while they negotiate a deal. The U.S. said that it will raise its 10% tariff on $200 billion worth of Chinese products to 25% if a deal is not reached by March 1. A further escalation of the trade war could put downward pressure on global capital markets, which have recently entered a correction.

Both Trump and Xi have started to become wary of the economic impact of the trade dispute at home. Trump, who faces re-election in the autumn of 2020, is increasingly frustrated over the recent decline in stock prices and has instructed Treasury Secretary Steven Mnuchin and others to address that issue, according to a Treasury Department official. With business confidence among U.S. manufacturers having worsened by the biggest margin in about a decade in December, Mnuchin and other doves in the administration would like to ease concerns over the economy by putting the trade war on hold.

The Xi administration naturally wishes to avoid the additional U.S. tariffs. Business sentiment among Chinese manufacturers has plunged over concern that exports to the U.S. will drop, leading to pressure to lay off workers. The government is working hard to dispel the concerns of companies and investors, with a Commerce Ministry spokesperson noting that negotiators from both sides have been in close contact even over the Christmas holidays.

However, China hard-liners in the Trump administration, including U.S. Trade Representative Robert Lighthizer and trade adviser Peter Navarro, are pressing for a major change in China’s trade and investment rules, including ending industrial subsidies and forced technology transfers. The Chinese government is supporting the cultivation of advanced technologies that could have military applications, such as fifth-generation wireless technologies, artificial intelligence and self-driving automobiles. Many American officials are deeply distrustful of Beijing, arguing that China has stolen U.S. technologies through industrial espionage, cyberattacks and other means.

Beijing has pressed ahead with the “Made in China 2025” initiative to nurture high-tech industries with huge subsidies. Some trade negotiators are optimistic based on the view that China will concede, including by revising that initiative, but hard-liners within the Trump administration are against a simple compromise, arguing that a framework for verifying improvements in China is necessary.