Contours of Trump-Xi Bargain Emerge Before G-20 Showdown

(Bloomberg) --

Leaders of the Group of 20 economies haven’t arrived in Osaka yet, but a draft script for the big trade storyline is already emerging.

The U.S. and China are about to restart negotiations that have been stalled for more than a month, with Presidents Donald Trump and Xi Jinping expected to formally seal the temporary truce on Saturday.

In a phone call earlier this week, U.S. Trade Representative Robert Lighthizer, and his counterpart in Beijing, Vice Premier Liu He, hammered out some of the details. According to people familiar with the plans, here are a few:

• U.S. is willing to hold off putting tariffs on the remaining $300 billion of Chinese imports as talks resume.
• In return, China will make some compromises, such as backing off of threats to restrict rare-earth exports to the U.S.
• For talks to resume, China wants a two-way conversation — not just Beijing offering concessions.
• The U.S. will remain firm that China needs to work to address trade, investment and regulatory practices that Washington deems as unfair.
• The U.S. Treasury secretary sounded cautiously optimistic in an interview with CNBC that boosted U.S. stock futures.
• Trump told Fox Business Network on Wednesday that his Plan B if there is no deal would be to impose tariffs of 10% on the remaining Chinese imports.
• Essentially, both sides look willing to holster tariffs and other weapons of trade warfare while they try to reach a deal, again.

Charting the Trade War

Trump-Xi Summit at G-20 Could Save the World $1.2 Trillion

Today’s Must Reads

• Xi’s G-20 dilemma | Most of Trump’s demands entail the liberalization of the Chinese economy at the expense of the state-owned enterprises and party dominance that Xi has championed for most of his life.
• Trump’s packed agenda | Trump has trade at the top of his G-20 agenda, yet key issues including Iran, North Korea and next year’s presidential election will vie for his attention and present pitfalls.
• Asian investment | The U.S.-China trade war is weighing on businesses in Asia Pacific, with companies reporting more delays or cancellation of investments than last year. Imports are also hurting.
• Legal loophole | U.S. tech companies have resumed selling certain products to Huawei after concluding there are ways around the Trump administration’s blacklist of the Chinese telecoms giant.
• Asia trade pact | The regional partnership could be finalized in 2019, though not all 16 countries wishing to join may wind up as part of the agreement. 

Economic Analysis

• Japan’s diversification | The change in composition of Japanese trade is insulating it from global headwinds. 

Coming Up

• From Thursday: Meetings of EU and Mercosur countries in Brussels
• Friday-Saturday: G-20 leaders meet in Osaka, Japan

--With assistance from Jeremy Diamond.

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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