Trump has ‘very long and good’ phone call with China’s Xi
Donald Trump maintains that the chat about trade issues is moving along nicely, but not everyone, including Beijing, is buying it
Washington — US President Donald Trump wants to reach an agreement on trade with Chinese President Xi Jinping at the G20 nations summit in Argentina later this month and has asked key US officials to begin drafting potential terms, according to four people familiar with the matter.
The push for a possible deal with China was prompted by the president’s phone call with Xi on Thursday, the people said, requesting anonymity to discuss internal deliberations. Afterwards, Trump described the conversation as “long and very good” and said in a tweet that their discussions on trade were “moving along nicely”.
Trump asked key cabinet secretaries to have their staff draw up a potential deal to signal a ceasefire in an escalating trade conflict, the people said, adding that multiple agencies are involved in drafting the plan.
The news prompted stocks to surge in Hong Kong and China, while the offshore yuan jumped as much as 0.31% before paring gains to trade 0.26% higher. The Hang Seng Index rose as much as 4%, headed for its biggest gain since 2015, and the Shanghai Composite Index climbed more than 2%, on track for a fourth day of gains for its longest winning streak since February.
The phone 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 G20 summit, which is scheduled to take place from from November 30 to December 1.
“Those discussions are moving along nicely,” Trump tweeted on Thursday. At a campaign rally in Columbia, Missouri, on Thursday night he said, “they want to make a deal ... “He wants to do it,” Trump said of Xi. “They all want to do it.”
It was unclear if Trump was easing up on US demands that China has resisted.
Not buying it
Reaction to the news was mixed, with some analysts viewing it as a positive sign of a breakthrough and others seeing it as a ploy by the Trump administration to boost market sentiment ahead of mid-term elections next week.
“I don’t buy the story for a second,” said Michael Every, head of Asia financial markets research at Rabobank in Hong Kong. “This seems a perfect way to ensure equities rally into election day, put Xi into a box in terms of what is expected of him, and then have someone to blame when the deal then falls through.’
In recent months China has repeatedly questioned the US’s sincerity in trade talks, wary of agreeing to something only to have Trump change his mind
However, Tuuli McCully, head of Asia-Pacific economics at Scotiabank in Singapore, called the news “encouraging.” It “likely reflects the fact that businesses in the US are starting to feel the impact of the trade conflict through higher prices and squeezed margins.”
The possible warming of relations comes after months of escalating tensions over trade that are threatening to spill into other areas of disagreement, including freedom of navigation in the South China Sea. This year, the Trump administration has already imposed tariffs on $250bn in trade with China and is threatening to impose tariffs on all remaining imports from China, which were worth $505bn last year.
US-China talks have made little progress since May, when Trump put a stop to a deal that would have seen China buy more energy and agricultural goods to narrow the trade deficit. In Beijing, that 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 was to thwart China’s rise.
In recent months 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 (SOEs).
One person said a sticking point in any potential deal is intellectual property theft, where the Trump administration has sought to take a hard line. On Thursday, the US accused a Chinese SOE of conspiring to steal trade secrets of US chip maker Micron Technology as part of a US justice department crackdown against China in cases of suspected economic espionage.
Fujian Jinhua Integrated Circuit and Taiwan’s United Microelectronics were indicted along with three individuals, the US justice department said. The US also sued to stop the companies from exporting any products created using the trade secrets to America.
White House economic adviser Larry Kudlow said 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, cyber-security 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”.
“If a Trump-Xi deal at the G20 Summit can set the broad framework for renewed bilateral trade negotiations, it may help the global trading system avert the abyss of an escalating US-China trade war in 2019,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore.