Markets are eagerly awaiting the Trump-Xi meeting that will take place at the G20 summit in Osaka, Japan this week. While there is plenty of skepticism about the talks yielding a breakthrough in the trade dispute, there is still reason for cautious optimism and hope for some kind of truce.
Trump has claimed that he would be “completely happy” to slap tariffs on further US$325 billion in Chinese goods in the absence of a trade deal. He insisted that the additional tariffs would benefit the United States and prompt a number of companies to move manufacturing out of China.
The rhetoric notwithstanding, there have been signs that Washington may seek a ceasefire of sorts. Among them is the postponement of a speech by Trump’s deputy, US Vice-President Mike Pence, in which he had been expected to criticize China’s human rights record.
Meanwhile, Trump has essentially been silent about the dispute over Hong Kong’s controversial extradition bill, merely saying that he hopes the protesters and the Hong Kong government “can work it out”.
Also, Trump is said to be holding up a final decision on selling advanced US tanks and other military equipment to Taiwan.
All this suggests that Washington is trying not to annoy Beijing ahead of the G20 summit.
Trump had targeted Chinese telecoms equipment giant Huawei on grounds of national security, but has said openly that Huawei could be part of a trade deal between China and the United States. Hence, the ban on Huawei may have just been a negotiating tactic.
People who understand China’s politics well would be aware of one thing: If a top leader attends a key meeting, there must be some positive outcome. Beijing confirmed the Xi-Trump meeting only on June 18. It indicates the two sides have reached some degree of consensus before that.
China will hope to reach a deal to defuse tensions against the backdrop of an economic slowdown and supply chain relocation and job market worries.
Thus, we can expect the upcoming Xi-Trump meeting to at least prevent an escalation in the trade war and restart of negotiations between the two sides.
If two leaders can reach an agreement on at least a few things, that will still be good.
The full article appeared in the Hong Kong Economic Journal on June 26
Translation by Julie Zhu with additional reporting
[Chinese version 中文版]
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