Are Trump’s trade talks dead before they begin?
Share this on

Are Trump’s trade talks dead before they begin?

LEADERS of the G20 countries will meet in Buenos Aires on Friday, but all eyes will be trained on US President Donald Trump and his Chinese counterpart Xi Jinping as they have their first face-to-face meeting since the escalating trade war began at the start of the year.

While hopes had been high the two could succeed where their delegations have failed, it now looks like the chances of reaching a resolution may be over before they even began.

In an interview with the Wall Street Journal on Monday, Trump said he intends to go ahead with plans to raise tariffs on US$200 billion worth of Chinese goods to 25 percent, saying it was “highly unlikely” he would accept Xi’s request to hold off on the increase.

SEE ALSO: Could Trump and Xi’s ‘good’ chat spell an end to the US-China trade war?

He also threatened to impose more tariff hikes if the negotiations didn’t go America’s way.

“If we don’t make a deal, then I’m going to put the US$267 billion additional on” at a tariff rate of either 10 percent or 25 percent, Trump told the Journal.

US stock options traders will be watching the events in Buenos Aires with a keen eye.

The ongoing trade tensions have proven influential on the sensitive US stock market and whatever happens on Friday, the gathering of the world’s biggest economies is likely to cause more volatility.


File picture shows China’s president Xi Jinping and US President Donald Trump review the Chinese honour guards during a a welcome ceremony in Beijing last November. Source: Nicolas Asfouri/AFP

Stocks have already had a rough two months, with major US benchmarks sliding back into their second correction of the year as rising worries over trade prove a big contributor to investor unease.

“If the US still continues on a path toward escalation of the trade dispute with China after the G20 meetings, we can infer that economic considerations are slipping in the administration’s policy agenda,” UBS Global Wealth Management Chief Investment Officer Mark Haefele said in a note to Reuters on Monday.

China has also suffered under the threat of a full-blown trade war. The International Monetary Fund (IMF) predicts the ongoing trade tensions could knock 1.6 percentage points off China’s economic growth over the first two years.

SEE ALSO: US-China Trade: Are we heading for the next cold war?

The assessment took into account all current and proposed tariffs on Chinese goods that enter the US, as well as knock-on effects the trade tensions have on investor confidence and financial markets.

The usually untouchable Xi is also facing mounting pressure back home for this handling of the situation. Criticism of China’s Communist Party (CCP) and their leader are usually muted, if allowed at all, but a series of recent news articles have pointed to internal criticism of Xi.

Rivals have reportedly latched onto deteriorating relations with the US and the ensuing economic woes as a tool to challenge Xi’s leadership.

In a bid to change the tone, the party took the extreme step of banning the phrase “trade war” from the media.


US Vice President Mike Pence makes his keynote speech at the CEO Summit of the Asia-Pacific Economic Cooperation (APEC) summit in Port Moresby on November 17, 2018. Source: Peter Parks/AFP

But the US messaging surrounding the tensions has only hardened rather than eased.

In a speech at the APEC Summit on Nov 17, US Vice President Mike Pence continued the administration’s hard-line approach and showed no signs of softening to Beijing’s requests.

Pence called on nations to reconsider backing China’s massive Belt and Road infrastructure initiative and stopped just short of declaring what analysts have called “economic war” on the country.

SEE ALSO: US will lose the trade war – but the whole world will suffer

A month earlier at a talk at the Hudson Institute, Pence restated his criticism of Beijing, accusing China of a litany of economic, political, and military misdeeds.

Financial Analyst at CNBC, Jim Cramer, voiced concern that what seems like dealmaking could actually be a long-winded strategy to destabilise China’s socioeconomic position.

With no clear strategy put forward by the White House and neither side looking like they are willing to make concessions, it’s likely any agreement in Argentina will be a tactical pause at best.

While this will provide short-term relief to jittery stock markets, it’s unlikely to have any material or long-lasting effect on the slide toward a high-stakes geopolitical competition between the United States and China.