Trump, Xi prepare to discuss the trade war

BUENOS AIRES, Argentina — President Donald Trump and Chinese President Xi Jinping are sitting down for a highly anticipated dinner Saturday evening to thrash over a trade dispute that has strained relations between the world’s two largest economies.

“We’ll be talking about a thing called trade, and probably other things also. But primarily trade,” Trump told reporters on Saturday afternoon at a bilateral meeting with German Chancellor Angela Merkel at the annual G-20 summit. “It’s a very important meeting.”

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The U.S. and China have been battling all year, first over Trump’s decision to impose tariffs on all steel and aluminum imports in the name of national security. Then in an action aimed solely at Beijing, Trump ratcheted up pressure by imposing tariffs on more and more of China’s exports to the United States.

The dinner has been moved up an hour, to 5:30 p.m. Argentina time and 3:30 p.m. Eastern, after the president canceled an afternoon press conference.

Heading into the big dinner, Trump indicated a deal was within reach, although it could consist simply of an agreement to put further U.S. tariff action on hold while the two sides start a new round of negotiations.

“If we could make a deal, that would be good,” Trump told reporters on Friday. “I think they want to, and I think we’d like to … There’s some good signs. We’ll see what happens.”

A Chinese official also sounded a cautiously optimistic note.

“The agreement part is growing … but there are still some differences for now,” Wang Xiaolong, director general of China’s Foreign Ministry’s department of international economic affairs, said on Friday.

The White House said several American officials will be attending the dinner: Assistant to the President for Trade and Manufacturing Policy Peter Navarro, U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, National Economic Council Director Larry Kudlow, Secretary of State Mike Pompeo, Chief of Staff John Kelly, National Security Adviser John Bolton and senior adviser Jared Kushner.

The Chinese delegation accompanying Xi includes: Vice Premier Liu He, China’s ambassador to the U.S. Cui Tiankai, and Ding Xuexiang, Xi’s chief of staff. Also attending are Yang Jiechi, top diplomat; He Lifeng, chief of China’s economic planning agency; Wang Yi, minister of foreign affairs; Zhong Shan, minister of commerce; and Wang Shouwen, vice minister of commerce.

This year, Trump has imposed duties on $250 billion worth of Chinese goods, including a 25 percent penalty on an initial $50 billion and a 10 percent duty on the remaining $200 billion. The tariff on the larger batch is scheduled to rise to 25 percent on Jan. 1 unless Trump decides to hold off.

One possible result of the talks could be a deal to delay U.S. tariff increases in exchange for an agreement by China to resume purchases of U.S. soybeans and liquefied natural gas, said Derek Scissors, a China analyst at the American Enterprise Institute.

“I know the majority of both sides want to avoid the tariff escalation and want to lift this sort of Chinese semi-embargo on soybeans and energy,” Scissors added. “Obviously everybody could poke holes at that announcement, but if you say this is just our first step to create the right conditions for talks, that’s a completely tenable position.”

Prior to the trade war, which has prompted Beijing to retaliate by raising duties on about $110 billion worth of U.S. exports, China was the number one overseas market for U.S. soybeans and a substantial market for U.S. LNG and petroleum.

“The Chinese didn’t just impose higher tariffs. They just sort of stopped taking delivery,” Scissors said.

The United States has presented Chinese officials with a list of 142 reforms it would like to see stemming from an investigation conducted by the Office of the U.S. Trade Representative into China’s intellectual property practices. It accused the world’s second largest economy of fueling its rise by forcing American companies to transfer technology or in other cases by tolerating outright intellectual property theft.

Chinese officials have indicated they are some U.S. demands which they could address in the short term, others that would take more negotiation and a third set that would be very hard to satisfy because of national security and other concerns.

At the same time, the Chinese have complained that it’s very difficult for them to know who is actually in charge of Trump’s trade policy because there are some many voices on trade — often with widely disparate views — within the administration.

At various times over the past two years, Mnuchin, Commerce Secretary Wilbur Ross and Lighthizer have each appeared to be Trump’s point man in talks with Beijing.

In addition, Navarro has been encouraging Trump to keep up pressure on Xi to achieve meaningful reforms. His presence in Buenos Aires has fueled concern that a ceasefire may not be reached.

“The game that China has played — and they played people in the Bush administration like a violin — is to do the tap dance of economic dialogue,” Navarro said recently at the Center for Strategic and International Studies. “That’s all they want to do. They want to get us to bargaining table, sound reasonable, and talk while they keep having their way with us.”

On Friday, Trump seemed to indicate that Kudlow, his more market-oriented economic chief, was in the driver’s seat.

“We have a lot of very talented people working. Larry Kudlow’s representatives are dealing with [the Chinese] on a constant basis,” Trump said.

Zhou Xin of the South China Morning Post contributed to this report.