G-20 Summit Could Be Turning Point in US–China Trade War

November 25, 2018 Updated: November 25, 2018

WASHINGTON—Investors have been holding their breath in the lead-up to the U.S.–China meeting at the Group of 20 (G-20) summit in Argentina this week. While the outcome of the talks is hard to predict, any consensus over trade can bring a huge relief to global markets.

President Donald Trump and Chinese leader Xi Jinping have agreed to meet on the sidelines of the G-20 summit, which will be held in Buenos Aires on Nov. 30 and Dec. 1. The exact timing of the bilateral meeting hasn’t yet been revealed. The two leaders are expected to discuss a range of issues, including North Korea, but trade is likely to dominate the conversation.

Experts share some optimism that the U.S.–China meeting will result in a calming of tensions, at least temporarily.

The two sides will likely agree on a version of a trade ceasefire, said Matthew Goodman, a senior vice president at the Center for Strategic and International Studies.

“I’d say it’s probably 50–50 as to whether there will be a deal,” Goodman said, adding that both parties have motivations to put the trade dispute on hold.

U.S. capital markets have been volatile recently, partly due to uncertainty resulting from the U.S.–Sino dispute. Stocks fell sharply after peaking in early October, with the Dow Jones Industrial Average and S&P 500 falling almost 10 percent. The stock market may be putting pressure on Trump to strike a ceasefire deal with Beijing, Goodman said.

The state of the Chinese economy is likewise putting pressure on Xi. Chinese economic growth has slowed this year, battering its stock market. The Shanghai composite index has fallen more than 20 percent year-to-date. Troubles will deepen in China if the trade tensions continue in 2019.

According to Goodman, there is a good chance that the meeting will blow up or there may not even be a meeting. Nevertheless, both parties have reasons to put the dispute behind them, he added.

Even if there is a ceasefire, it’s not going to solve the problem in the long term, Goodman added. China needs to make deep, structural reforms that the United States and allies have been demanding for years.

Tensions Rise

Tensions between Washington and Beijing have increased in recent weeks ahead of the summit.

Vice President Mike Pence said earlier that the United States remains in a strong position against China and that Trump is prepared to more than double his tariffs. Pence signaled that Washington won’t back down unless China fundamentally changes its attitude.

U.S. Trade Representative Robert Lighthizer issued last week an update of a “Section 301” investigation into China and concluded that Beijing has failed to correct its “unfair, unreasonable, and market-distorting practices.”

In an interview with BBC, Kevin Hassett, the chairman of the president’s Council of Economic Advisers, said that there could be a case to evict China from the World Trade Organization, as China has “misbehaved” as a member of the organization.

The Trump administration gave Beijing officials a long list of issues that the United States and other nations face with China, including intellectual property theft, forced technology transfer, restricted access to Chinese markets, and the communist regime’s interference in the politics of other countries.

Trump had previously said that 142 concessions offered by China were “not acceptable.” The commitments by the regime fell short of the type of key structural reforms that Washington demanded.

Trump, however, had expressed his optimism about reaching a deal with the Chinese leader before the new year, when new tariffs kick in.

The United States has levied duties on about $250 billion worth of Chinese goods. The tariffs will jump to 25 percent on Jan. 1, 2019, from the current 10 percent. If no deal is reached, the Trump administration may impose tariffs on an additional $267 billion in Chinese goods.

Last Summit

The last G-20 summit, which was held in Hamburg, Germany, ended with a disagreement over trade-related issues.

“I would expect that to be the case again,” Goodman said.

Deep divisions between the United States and China over the language on trade and investment surfaced at the Asia-Pacific Economic Cooperation summit in Papua New Guinea, on Nov. 17. As a result, leaders who attended the summit failed to agree on a joint communique for the first time in 25 years.

“I think there probably will be a communique at the end or some kind of chairman’s statement, but it may well be that the trade language gets in the way of that,” Goodman said, adding that trade would again be one of the contentious topics for all countries attending the G-20 summit.

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