June 24, 2019 / 9:15 PM / 4 months ago

Breakingviews - Trump will be first to blink in China stare-down

U.S. President Donald Trump and China's President Xi Jinping arrive for a state dinner at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Jonathan Ernst

SAN FRANCISCO (Reuters Breakingviews) - Donald Trump will be the first to blink in his stare-down contest with China. The U.S. president and counterpart Xi Jinping will try to restart trade talks at this week’s G20 summit. Trump may be hoping Beijing will back down, but he needs a deal more – and Xi is feeling combative.

Trump has reversed roles with China, now acting as the pursuer. The commander-in-chief lobbied Beijing to meet Xi when the world’s top-20 economies gather in Japan this Friday. And he tamped down moves that could have impeded that effort. Vice President Mike Pence twice delayed a hard-line speech on China. Granted, the Commerce Department on Friday barred five Chinese firms involved in supercomputers from buying American products, but that kind of action would not be on Trump’s radar. 

China’s hard line has thrown Tariff Man off his game. Other countries have tried to appease Trump amid tariff threats. Most recently, Mexico pledged to step up detainments of Central American migrants trying to cross into the United States to deter a plan to put levies on all Mexican imports – though it was a move agreed on weeks earlier.

Beijing initially tried that tack but has changed its tune. China recently suggested squeezing its supply of rare-earth minerals to the United States and is putting together an “unreliable entities list” of foreign companies that don’t follow market rules. This month China fined Ford Motor’s local joint venture $23.6 million for violating anti-monopoly laws.

The pushback is likely to derail Trump’s desire to cast himself as a dealmaker. Mounting U.S. economic woes are adding to the pressure. There were twice as many farm bankruptcies in Illinois, Indiana and Wisconsin in 2018 as there were in 2008, while dairy farmers have lost 50% of their market share in China. Engine-maker Cummins said tariffs will wipe out the gains from the 2017 tax cuts.

Time is also not on Trump’s side. With the 2020 election looming, the president has incentives to put proposed levies on another $300 billion in Chinese imports on hold. With the Federal Reserve projecting GDP growth of 2% next year, Trump may be pushed to accept a deal that doesn’t include substantive changes to China’s record on intellectual-property theft or forced technology transfers. He will spin it as a victory, but it will be a superficial one.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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