Trump and Xi step back from trade war, but for how long?

When President Trump sat down to his much-anticipated Buenos Aires dinner with Xi Jinping Saturday night, he praised the personal relationship he’s developed with the Chinese leader and predicted it would lead to good things for both countries.

“The relationship is very special … that I have with President Xi,” Mr. Trump said, flanked by Treasury Secretary Steve Mnuchin and other senior aides, and seated directly across from a smiling Xi. Indeed, that special relationship was the “primary reason,” Trump added, that he expected the two of them would agree on something “that would be good for China and good for the United States.”

Two-and-a-half hours later, the dinner meeting that stole the show at the weekend’s G20 summit concluded with a deal: a suspension of the intensifying trade war between the world’s two largest economies that international economists have said is beginning to threaten global economic growth.

Trump agreed not to follow through on plans to more than double on Jan. 1 the 10 percent tariffs the US has already imposed on $200 billion in Chinese goods, while Xi agreed to boost purchases of American farm goods and other products. Indeed, Trump said the Chinese would be cutting tariffs and “buying massive amounts of products from us.”

Both countries agreed to a fresh round of trade talks, to commence this month and stretch into next spring, that are intended to reach beyond questions of tariffs to discord over China’s state-based industrial policy and intellectual property protections.

And in what White House press secretary Sarah Sanders called a “wonderful humanitarian gesture,” China agreed to designate Fentanyl as a controlled substance. Chinese Fentanyl is a major contributor to the US opioid crisis.

Yet while the agreement reached between the two leaders produced an almost audible global sigh of relief, it is widely seen as little more than a cease-fire in the unresolved trade conflict between the world’s two economic giants.

“There may be temporary cease-fires along the way, but those will do little more than put off the broader issues at the heart of the intensifying competition between China and the United States,” says Roberto Bouzas, professor of international economics at Universidad de San Andres in Buenos Aires.

Moreover, while the accord postpones the threat of a deepening trade war, experts foresee an arduous road ahead in addressing the broader geopolitical confrontation between a retreating global superpower and a China that is rising rapidly to grasp at global leadership. At stake: not just trade and state-directed versus private-enterprise economic models, but also issues ranging from Asian security to regional development models.

“They’ve kicked the can down the road for 90 days, a period of time in which they pledge to take up not just tariffs but things like forced technology transfer [for American companies seeking to enter the Chinese market] and IP [intellectual property] protections,” says Joel Trachtman, professor of international law at Tufts University’s Fletcher School in Medford, Mass. “But I don’t think it deals with the fundamentals of the strategic-position conflict. To address that, China has got to stop growing and adding technological prowess,” he adds, “and that’s not going to happen.”

As Professor Bouzas notes, the difference between the US and Chinese economies has shrunk. As recently as 2000, the US economy was more than eight times larger than China's. By 2016, the US economy only stood at about one and a half times larger than China's.

China's rise on display

China’s rise as a global power was on display at the two-day G20 summit of the world’s major economies, while an uncharacteristically subdued and withdrawn Trump symbolized for some the US retreat from its once-hyper-dominant position in global economic affairs and the advent of a multipolar – some say leaderless – world.

Xi presented himself as a champion of multilateralism, attending a number of side meetings with groups of leaders on multilateral issues – such as one with French President Emmanuel Macron and United Nations Secretary General Antonio Guterres on advancing the Paris climate accords.

Trump, who has made clear his disdain for large international gatherings and multilateral diplomacy, emphasized his preferred bilateral diplomatic approach – and even then either canceled or downgraded a number of his planned bilateral meetings. He canceled his anticipated sit-down with Russian President Vladimir Putin, for example, citing Russia’s seizure late last month of Ukrainian vessels and sailors. He downgraded planned meetings with South Korea’s Moon Jae-in and Turkey’s Recep Tayyip Erdoğan to brief stand-up chats.

The US did agree to sign on to the summit final communique – something Argentine organizers had fretted about after Trump memorably refused to sign on to the statement issued by leaders at last June’s G7 summit in Canada.

But even in the communique the US stood apart from the rest, insisting on a paragraph noting its withdrawal from the Paris climate accords – which all other summit participants reconfirmed as a vital part of global cooperation and action.

Trump administration officials also cited as a success language in the statement that underscores a need for reform and “improvement” of the global trading system and specifically the World Trade Organization.

But some experts said the language stating that the global trading system “is currently falling short of its objectives” could hardly be objectionable to anyone.

Moreover, it hardly reflects the harshest of Trump administration criticisms of China’s trade practices – including that China fuels its economic rise in part through stealing American intellectual property, or forcing American companies to turn over their proprietary technologies as part of securing joint-ventures with Chinese companies.

Global patience with US?

In a particularly damning report last March, US Trade Representative Robert Lighthizer concluded that China seeks to dominate future technologies. More recently. Mr. Lighthizer, one of the administration’s China hawks, said China has not altered its deceptive activities despite US pressure.         

The Fletcher School’s Professor Trachtman says the language in the G20 communique falls far short of Trump’s past attacks on the WTO – which have included threats to bow out of the global trade organization.

Instead, what Trachtman sees in the communique’s WTO language and reference to US objections to the Paris accords is a kind of accommodation of current US leadership that seeks to limit deeper damage to the international system of governance.

“I think we’re seeing expressions of a new strategic patience on the part of the rest of the world,” says Trachtman, “with other leaders saying, ‘We’re not going to turn away from the Paris climate accords, we’re not going to turn away from the WTO, but we’ll let the US take this divergent path for now, and we’ll wait for a more amenable negotiating partner in managing the global trade system and other multilateral efforts.’ ”  

One White House official, speaking to journalists on condition of anonymity, said the communique included “some of the United States’ biggest objectives.” Those included the separate paragraph noting US withdrawal from the Paris accords, and removal of draft language on multilateralism and protectionism.

Perhaps most notable to the more than 2,500 journalists from around the world assembled at the summit was Trump’s cancellation of his planned press conference at the G20’s conclusion. As one European journalist who had witnessed Trump’s feisty and confrontational performance at last June’s NATO summit wondered, “Where’s the Trump who makes a show out of press conferences and loves to bash allies?”

White House officials said the press conference was canceled out of respect for the late President George H. W. Bush, who passed on Friday. And as for allies, Trump did honor a planned meeting with German Chancellor Angela Merkel, calling her a “friend” and praised their “great working relationship.”

Authoritarian handshake

Still, some summit participants saw reflection of a larger US global withdrawal in Trump’s toned-down participation. And what bothers some about a US retreat from global leadership is that it risks ceding ground to the very illiberal and authoritarian forces the US-led system has aimed to hold in check.

For some, the exuberant greetings exchanged by Mr. Putin and Saudi Crown Prince Mohammed bin Salman represented a kind of secret handshake of the world’s growing and increasingly unleashed authoritarians.

Argentine President Mauricio Macri hailed the summit as a resounding success for “global consensus,” but some Argentine observers worried publicly that the iconic image of this G20 summit will be of the hybrid high-five fist-grab between Putin and the crown prince Mohammed bin Salman – two leaders widely seen to have the blood of domestic dissidents on their hands.

The CIA has determined with high confidence that the crown prince authorized the killing of Saudi journalist and US resident Jamal Khashoggi, while British intelligence concluded that Putin signed off on the poisoning of a dissident former Russian spy and his daughter living in Britain.

Noting the absence at the summit of a robust US leadership role, some analysts said the two leaders’ high-five would live on to symbolize the free path the US has ceded to advancing strongman rule.