Much of the attention at the G20 summit in Argentina this week will be focused on the sidelines, rather than the main events. It is there that, after the expected smile and handshake for the cameras, US president Donald Trump will meet Chinese premier Xi Jinping, as the trade war between the two countries grows increasingly rancorous.
There are hopes, however limited, that the meeting between the two leaders in Buenos Aires will result in a calming of tensions which have so far resulted in huge share price drops, most notably in US tech stocks.
The two countries’ game of tit-for-tat tariffs on each other’s goods has rumbled on for months, as Trump tries to fulfil his pledge to help create more US manufacturing jobs. The tariffs have been blamed for a weakening of China’s mighty manufacturing sector, which earlier this month showed a marked slowdown. Three rounds have been imposed on Chinese goods by the Americans, while China has done the same with $110bn of American goods.
Trump has threatened to slap tariffs on the remainder of China’s $500bn-plus exports to the US if the disputes cannot be resolved.
Suggestions that the impasse might be resolved have been met by surging stock prices. Earlier this month, Asian shares jumped when reports emerged that Trump wanted to reach an agreement with the Chinese, with the president tweeting that talks were “moving along nicely”.
A few days later, in remarks meant to portray his country as a champion of globalisation as it remains locked in the trade war, Xi promised to lower import tariffs and improve access to the Chinese market. However, while Xi claimed China had entered a “new round of high-level opening-up,” he did not make any concrete concessions to the White House.
By last week the outlook did not appear so rosy. “China has not fundamentally altered its unfair, unreasonable and market-distorting practices,” said US trade representative Robert Lighthizer. That came after Asia-Pacific leaders had failed to bridge gaping divisions over trade at the Apec summit in Papua New Guinea. For the first time, leaders were unable to agree on a formal written declaration, amid sharp differences between the world’s top two economies over the rules of global trade.
Vice-president Mike Pence said the president was prepared to more than double the tariffs, and that the US’s strategy would not change until China changed its practices.
Also last week, White House adviser Larry Kudlow said that he expected there to be a direct confrontation between the two countries over trade at the G20: this after a delegation of Chinese cancelled their trip to Washington for talks. “It will come to a head at the G20 – I think that’s the key point,” he said. Trump had previously said that 142 concessions offered by China were not acceptable – although he suggested a deal could be struck before the new year.
Commentators have said that any positive moves, even to keep on talking, would help settle the markets and further tensions would prompt investors to hold on to their money.
The meeting between the two leaders will not be the only thing worth watching at the G20: Saudi crown prince Mohammed bin Salman, widely suspected of ordering the murder of journalist Jamal Khashoggi, is expected to attend.
Deciding whether or not to participate in meetings with him will pose a dilemma for many.
