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Breakthrough, escalation or expiration? This is an open question that will mark the next phase of the US-China trade war as presidents Donald Trump and Xi Jinping prepare to meet on the sidelines of the G20 summit in Buenos Aires.
The two leaders have dinner together on Saturday.
The hope of an agreement eased on Thursday after the South China Morning Post announced that Peter Navarro, one of Trump's most hawkish trade advisers, was going to witness the meeting.
As he was preparing to leave for the summit, Trump both raised and tempered expectations that both sides could resolve their differences.
"I think we are about to do something with China, but I do not know if I want to do it," the president told reporters on Thursday. "Because we currently have billions and billions of dollars entering the United States in the form of tariffs or taxes."
A prolonged trade war could have a significant impact on the global economy. Prior to Saturday's meeting, the White House imposed on Beijing the responsibility to break the current stalemate.
"If China wants to come to the table, or in this case the dinner table, with new ideas, new attitudes and new cooperation, as the president said, there is a good chance that They can make an agreement, "the White House told the White House. Councilor Larry Kudlow told reporters on Tuesday
The United States imposed three sets of punitive tariffs on Chinese products this year and Beijing responded by applying tariff restrictions on US products.
This week, Trump announced that he was ready to play hardball in Argentina. In an interview with The Wall Street Journal on Monday, he said that it was "very unlikely" that he is delaying the project to raise tariffs on Chinese imports for $ 200 billion, from 10% to 25% in January.
Trump also threatened to impose tariffs on the remaining $ 267 billion of Chinese imports if an agreement did not materialize.
The United States and China have a number of complex issues to resolve.
The Trump administration has long complained about the bilateral trade imbalance between the two countries. China's intellectual property theft and forced technology transfers in areas where US companies can only access the Chinese market if they badociate with domestic firms are other important contentious issues .
Although few people expect a major breakthrough when they meet, some believe a temporary ceasefire is possible.
"There will probably be a temporary pause in the trade war just after the G20 meeting, but I do not think the trade war will stop," said Ling Chen, an badistant professor at the Johns Hopkins School of Advanced International. Studies. Jazeera.
"Both sides of the leadership have been unpredictable in their own way," said Chen. "But one thing that is predictable is that it is unlikely that they will easily compromise each other."
Pre-summit posture
Kudlow said Tuesday in his speech that the United States had a stronger economic base than China joining the G20. Although recent data support this point of view, both countries are encouraged to leave their differences aside.
The US economy is indeed experiencing a record year. Growth slowed to 3.5% in the last quarter, as consumers spent more and businesses invested more thanks to the spin-offs from Trump's $ 1.5 billion tax cut.
But investors are looking to the future and not to the back. And they are worried about what is happening on the horizon.
In recent weeks, equity markets around the world have been shaken by concerns over how trade tensions and rising interest rates could affect economic growth and corporate profits.
The weakness of the US real estate market, the possibility that low crude prices are having a negative impact on US oil drillers and the announcement made by the auto giant General Motors to let its plants idle and suppressing thousands of jobs in the United States and Canada have strengthened the view that the US economic recovery is getting long in the tooth.
At the same time, China's economy grew at a slower pace than expected by 6.5 percent in the third quarter, the slowest pace since the global financial crisis.
Economists estimate that much of the deceleration in China is a consequence of policies designed to limit riskier borrowing and stabilize debt levels, while tariffs have only been high. a modest negative impact on growth.
Exports have largely resisted to date, although resilience has been attributed to a rush of orders before the entry into force of punitive tariffs.
Nevertheless, uncertainties caused by the deterioration of trade relations have had a significant impact on investor sentiment.
The Shanghai Composite Index has dropped about 30% this year, making it the worst performance among the world's leading stock indexes.
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What is the final phase of the US-China trade war? (25:00) |
Health of the world economy on the line
It's not just the health of the world's two largest economies that is at stake when Trump and Xi meet at the G20.
If the US raises rates in January as planned, Asti Sheth, chief executive of Moody's Investment Service, is forecasting a 0.2% reduction in global GDP growth in 2019.
"We see three ways in which US-China tensions could affect businesses, countries and sectors," Sheth told Al Jazeera. "Firstly, by their macroeconomic effect on growth and trade flows, secondly, by their impact on the financial markets and investor sentiment, and thirdly, by their effect on the supply chain and the decisions made by investors. # 39; investment. "
In a blog this week, IMF head Christine Lagarde warned that "darker clouds are threatening" the global economy and urged G20 leaders to pursue reforms to boost growth, including the elimination of new trade barriers and the reversal of recent tariffs.
"Success here depends on our speed of action," she wrote, "and our joint action."
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