President Donald Trump’s newfound zeal to resolve his trade war with China risks hitting some familiar obstacles, including himself.

Trump set up a call with Chinese president Xi Jinping on Thursday, the first between the leaders in six months. Afterward, he directed his Cabinet to draft potential terms for a trade deal he could agree to with Xi at the G20 conference in Argentina at the end of the month, according to four people familiar with the matter.

“Those discussions are moving along nicely,” Trump wrote on Twitter after speaking with Xi, five days before US midterm elections that will determine whether his party retains control of Congress. At a campaign rally in Columbia, Missouri, he added: “They want to make a deal.”

“He wants to do it,” Trump said of Xi. “They all want to do it.”

But there remains plenty of reason for pessimism.

Discord has already arisen among Trump’s trade team: US trade representative Robert Lighthizer is opposed to a push for a deal at the G20, according to two of the people.

White House economic adviser Larry Kudlow downplayed the potential for a quick deal.

Wait and See

“We’re doing a normal, routine run-through of things we already put together and normal preparation,” Kudlow said on CNBC Friday. “OK, there’s no mass movement, there’s no huge thing, we’re not on the cusp of a deal.”

Peter Navarro, director of the National Trade Council within the White House, struck a similar wait-and-see note on Saturday about the Trump-Xi meeting. In a Fox News interview he said the US is “not dependent on China economically.”

“We’re going to be fine regardless of what happens in Argentina,” Navarro said, adding that trade talks with China are “more difficult” than those with other countries ranging from Japan to Canada.

Then there are the president’s own idiosyncracies.

Trump has a history of agreeing in principle to deals before backing out. His critics say the trade pacts that he has so far completed, including a renegotiation of Nafta, represent little more than incremental improvements. And he has previously made concessions to U.S. adversaries that have drawn backlash from both Democrats and Republicans.

ZTE Move

In May, after his last phone call with Xi, Trump agreed to ease up on sanctions imposed on Chinese telecom equipment maker ZTE Corp., saying they would cost too many Chinese jobs. The decision was roundly lambasted in Congress.

“If this does turn out to be ZTE round 2, the president will be attacked by Democrats, and some Republicans, for talking a huge game on China but instead being played,” said Derek Scissors, a China expert at the American Enterprise Institute.

His critics say Trump also gave away too much to North Korean leader Kim Jong Un in negotiations over Pyongyang’s nuclear weapons program, with little to show in exchange, and was too conciliatory toward Russian President Vladimir Putin at their summit in Helsinki.

And Trump’s history of reneging on agreements is presumably well understood in Beijing.

Sincerity in Question

Trump revoked his government’s support for a joint statement following the G7 conference in Canada after Canadian Prime Minister Justin Trudeau criticized US steel and aluminum tariffs. He backed out on a deal congressional Democrats said they struck with Trump to provide legal status to young undocumented immigrants.

China has repeatedly questioned the US’s sincerity in trade talks, wary of agreeing to something only to have Trump change his mind. While Beijing is open to striking a deal that narrows the trade deficit, officials have resisted Trump’s other demands — including an end to subsidies for strategic industries, a stop to forced technology transfer and more competition for state-owned enterprises.

Much remains unclear about Trump’s posture toward China. For example, it’s unknown whether he is considering relenting on his administration’s hard line against China’s theft of US intellectual property, which one of the people said remains a key sticking point in any potential deal.

$250 Billion

A Chinese state-owned company was charged on Thursday with stealing technology from US chipmaker Micron Technology Inc., part of a Justice Department crackdown against China in cases of suspected economic espionage.

Trump has imposed tariffs on $250 billion in Chinese imports, and has threatened to slap duties on everything else the country ships to the US But that would mean raising prices on billions of dollars’ worth of consumer products, a category the administration has so far mostly avoided.

Stocks surged in Hong Kong and China on the report of constructive talks between Trump and Xi, while the offshore yuan jumped as much as 0.5 percent for the biggest two-day gain since August. The Hang Seng Index rose 4.2 percent, the biggest gain since 2011, and the Shanghai Composite Index climbed 2.7 percent, posting a fourth day of gains for its longest winning streak since February.

Insult to Xi

US-China talks have made little progress since May, when Trump put a stop to a deal that would see China buy more energy and agricultural goods to narrow the trade deficit. In Beijing Trump’s move was seen as an insult to Xi, who sent a personal emissary to Washington for the negotiations, and cemented a view that Trump’s real goal is to thwart China’s rise.

The telephone conversation on Thursday was Trump and Xi’s first publicly disclosed call in six months. Both sides reported that they had constructive discussions on North Korea and trade, with Chinese state media saying that Trump supported “frequent, direct communication” between the presidents and “joint efforts to prepare for” the planned meeting on the sidelines of the Group of 20 summit, which is scheduled to take place from November 30 to December 1.

The possible thaw in relations comes after months of escalating tensions over trade that threatened to spill into other areas of disagreement, including China’s military build-up in the South China Sea.

Kudlow said Thursday at an event in Washington that Trump and Xi might be able to break the logjam on issues during the summit. But Kudlow cautioned that Trump would “aggressively” pursue his agenda against China if no deals were reached on intellectual property theft, cybersecurity and tariffs on commodities, among other issues.

Trump’s posture toward China has been closely watched by investors, who are looking for the possibility of tensions cooling.

Xinhua, China’s state news agency, reported on Friday that Trump had told the Chinese leader that “he looks forward to meeting Xi during the G20 summit so they can have an in-depth discussion about some major issues.”

First Published: Nov 03, 2018 21:21 IST

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