Trump and Xi plan to deal with trade tension

On the US side, Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow are pushing the meeting. The two men, worried about the market's reaction to the trade war, have been trying for months to negotiate the negotiations without success. Meanwhile, the United States has imposed tariffs on Chinese imports worth $ 250 billion, about half of what China sends to the United States.

Trump assigned a team to plan the summit meeting with Xi, officials said. Christopher Nixon Cox, grandson of former president Richard Nixon, is one of the participants in the planning. His trip to China in 1972 finally allowed the establishment of diplomatic relations between the two countries. Meanwhile, the planning team on the Chinese side includes Liu He, Xi's economic envoy.

In August, the Chinese and US negotiators had sought talks to pave the way for the leaders' summit, but the recent stalemate has cast doubt on whether the meeting would continue as originally planned. The Chinese authorities exchanged trade talks with Washington late last month after the White House announced new tariffs on Chinese goods worth $ 200 billion and Beijing exercised retaliation by raising up to $ 60 billion on US products.

The hardest White House faction, represented by US Trade Representative Robert Lighthizer, and Trade Commissioner Peter Navarro, tried to use tariffs as leverage to bring China to make fundamental changes to Chinese industrial policy.

They fear that the United States will declare the end of the trade battle too soon, eliminating the pressure on Beijing. "The plan is to place Trump in a room with Xi, win a small victory and declare the end completely," said an American source familiar with the negotiations, who considers the interviews with skepticism.

US business leaders, on the other hand, hope that a summit could bring tariff relief, which they say would hurt their business. In particular, they want Trump to suspend plans to increase tariffs on $ 200 billion worth of goods, from 10% to 10% on January 1, as currently planned.

"At the meetings of our board of directors held in Beijing this week, we encouraged senior Chinese officials to share a detailed plan of action with their US counterparts to lay the groundwork for a meeting. G-20 success story, "said Jacob Parker, vice president of China operations at the US-China Business Council, a group representing about 200 US companies with trade relations with China.

The planning of the summit represents an effort on both sides to prevent the intensification of the trade conflict from harming US-China relations and further shaking global markets. On Wednesday, the US stock market had its biggest sell since February, in part because investors were increasingly worried about the US-China trade dispute. Chinese stocks and the yuan also fell on Thursday.

Bilateral relations also deteriorate in another way. In addition to stalling trade negotiations, military negotiations between the two countries were interrupted and the two sides blamed each other for a recent close encounter between their warships in the South China Sea.

Earlier this week, Secretary of State Mike Pompeo held talks in Beijing with Chinese Foreign Minister Wang Yi at the risk of complicating the summit meeting between Trump and the North Korean leader Kim Jong Un. This exchange followed an important speech last week in which Vice President Mike Pence highlighted the shift from the US strategy to the confrontation with China, accusing Beijing of undermining US interests on several fronts. notably by intervening in the American elections. Beijing vehemently denied these accusations.

The latest tariff exchange, which came into effect on September 24, brings China and the United States closer to a generalized trade war. Trump has pledged to further increase pressure on China by imposing tariffs on an additional $ 257 billion of Chinese products, subjecting all Chinese imports to penalty taxes.

While Chinese officials have repeatedly said they would not bow to pressure tactics, Beijing leaves open the possibility of new talks with Washington. "President Xi believes that there are many reasons to have a stable relationship with the United States," said a Chinese official.

Previous trade negotiations between the two sides have been completed without any breakthrough. Trump officials have estimated that Beijing's offerings, largely involving more purchases of agricultural products and other US goods by China, were not enough to meet the White House's demand for more favorable conditions. equitable for US companies in China.

With the threat of new tariffs, the Chinese authorities have wondered in recent weeks whether the time has come to negotiate. In Chinese political circles, many believe that Beijing should wait for negotiations after the November mid-term elections in the United States. According to them, Mr Trump is not ready to reach an agreement and accuses China of appealing to its political base and may be more able after the elections.

Until now, Beijing's strategy has been to react forcefully to the commercial offensive of the Trump administration. But because China imports less from the United States than the other way round, just under $ 130 billion last year, Beijing lacks penalizing products. If Beijing retaliates by targeting US companies operating in China, as some officials suggest, the country's leadership risks damaging the foreign investment climate and causing foreign capital flight just as the Chinese economy slows down.

That's why Xi also ordered his officials to continue to engage with Washington and US companies, according to Chinese officials and government advisers. For example, senior Chinese officials in recent weeks have done everything to reassure US companies that there would be no retaliation against them.

Write to Lingling Wei at [email protected] and Bob Davis at [email protected]

Corrections & Amplifications
An earlier version of this article incorrectly spelled Steven Mnuchin's first name.