President Donald Trump and Chinese President Xi Jinping look primed to pause trade hostilities when they meet for dinner Saturday night in Buenos Aires.
An emerging deal between the leaders of the world's two largest economies would see the United States hold off a major hike in tariffs on $200 billion in Chinese imports. That move, an escalation from 10 percent to 25 percent, is scheduled to bite on New Year's Day. In return for the United States shelving it, the Chinese could lift barriers to certain American goods. And the two sides would agree to enter negotiations toward a wider and more permanent agreement.
The details come from the Wall Street Journal, which reported Nov. 30 that the two sides have been engaged in talks for weeks and are looking to set up a new "architecture" beyond this weekend's G-20 summit for addressing a long list of American issues with Chinese trade and economic policy. Derek Scissors, a China expert at the American Enterprise Institute, independently confirmed that "a basic trade deal has been set" along these lines.
But trade watchers note a giant asterisk hangs over any tentative cease-fire. Trump demonstrates continually that it's a president's prerogative to change his mind. No deal will be done before Trump, at a minimum, consents to its terms in that high-stakes meeting with Xi
Trump, before taking off for Argentina on Thursday, was equivocal about reaching an agreement. "I think we're very close to doing something with China, but I don't know that I want to do it, because what we have right now is billions and billions of dollars coming into the United States in the form of tariffs and taxes," he said. "I really don't know. I think China wants to make a deal. I'm open to making a deal, but, frankly, I like the deal we have right now." (Goldman Sachs still rates escalation as more likely than a pause.)
Trump probably will frame whatever comes from the summit as another calculated move in his long game. But he's also under multiple and varied pressures that could shape the outcome. Here's a look at some of those pressure points.
Q: How big a victory will Trump demand?
The question of what, precisely, the Chinese will have to forfeit to satisfy the president has bedeviled Beijing and U.S. trade watchers since the confrontation launched earlier this year. It remains the most critical unknown. Trump rejected a truce that Treasury Secretary Steven Mnuchin negotiated with the Chinese in May requiring them to narrow the $375 billion trade deficit between the countries by purchasing more American goods. That precedent will make it difficult for Trump to declare victory over modest concessions from Beijing. But the Chinese will resist the sort of structural changes that Trump's more hawkish advisers are demanding. Those include commitments to backing off the state subsides behind their Made in China 2025 plan, policing theft of American intellectual property, and lowering market access barriers for American companies.
"Simply reducing the trade deficit between the United States and China is not good enough," Robert Atkinson, president of the Information Technology and Innovation Foundation, wrote Nov. 29 in a Washington Post op-ed. "The Chinese government would like nothing more than to buy more U.S. soybeans and natural gas in exchange for a pass on its unfair practices, particularly those designed as part of its 'Made in China 2025' plan to dominate a wide range of advanced technologies."
Q: Who's got Trump's ear?
A; Trump's trade advisers are divided into roughly into two camps: U.S. Trade Representative Robert Lighthizer and White House trade czar Peter Navarro toe the hardest line, while Mnuchin and perhaps to a lesser degree top White House economic adviser Larry Kudlow are seeking a deal with the Chinese in order to avoid an even nastier brawl. The hard-liners have looked ascendant for months. So it appeared significant when Navarro didn't make the original lineup of advisers joining Trump at his dinner with Xi. But Navarro is actually slated to attend the dinner with Xi, news that sent the Dow Jones industrial average to its low of the day when CNBC reported it Thursday.
Q: How much do shorter-term economic considerations weigh?
A: Economic storm clouds are gathering at home. Wall Street economists are speculating about the odds of a recession, as growth looks poised to slow, potentially sharply, next year. Consumer confidence is showing signs of slipping; business investment is lagging; the housing market is in a funk; the stock market has been wobbly, and firms large and small are complaining about the impact of tariffs, as trading pain in farm states continues to sharpen.
Trump has invested in finding a bogeyman to blame for the turbulence, namely Federal Reserve chairman Jay Powell, whom he even cast as responsible for the General Motors plant closures announced this week. But as his reelection campaign swings into view, the president may feel compelled to back away from a trade war of choice that has the potential to transform a drizzle into a monsoon.
Q: Do headlines from the Mueller probe follow Trump south?
A: The president got a pile of unwelcome news from special counsel Robert Mueller's ongoing probe of his campaign's alleged ties to Russia just before taking off for Argentina.The developments – including a new guilty plea from his longtime personal lawyer Michael Cohen – "cast fresh doubts on Trump's version of key events involving Russia, signaling potential political and legal peril for the president," The Post reported Nov. 29. Before taking off and after landing, Trump sent a number of tweets lashing out at Mueller and the investigation, and was back at it the morning of Nov. 30.
To the extent pressure from the probe crowds into Trump's strategy in talks with Xi, China watchers say it could play out one of two ways. "Either he feels more under siege and wants to appear tougher, or he decides he can't fight on 800 fronts at once and backs off," one tells me.
Notably, the investigation will almost certainly factor into Xi's approach, Scissors at AEI said, noting that the issue comes up in every conversation he has with Chinese officials.
"They are very interested in whether the investigation weakens [Trump's] position" he said. "What they mean is, 'Should we make our big offer to someone who can't fulfill it? Does he have the ability to give us a couple years of trade peace and deliver?' They think it's relevant."
The Washington Post
For Infobae's complete coverage of the Group of 20 summit in Argentina: www.infobae.com/america/g20-summit-2018/
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