Why Location Matters So Much for Trump-Xi Trade Summit

(Bloomberg) --

Chile’s decision last week to cancel the Nov. 16-17 APEC summit at which U.S. President Donald Trump and China’s Xi Jinping were hoping to sign their “phase one” (and quite likely only) trade deal has punched a hole in what were already fragile plans. It has also injected something else to negotiate into what has never been an easy process: the hunt for the right location. Here’s are some of the calculations for both sides:

• Trump on Friday and again over the weekend said he wanted to hold a signing ceremony in the U.S. He mentioned Iowa as one possible venue. Wilbur Ross, his Commerce secretary, told Bloomberg over the weekend that Hawaii and Alaska were also being considered.
• Iowa makes a lot of sense for both sides. Xi has a history there. In 1985 and again in 2012 he was feted when he visited Muscatine during his ascendancy. It’s part of his lore. For Trump, meanwhile, announcing the deal in a farm state — and possibly a state in play in the 2020 election — allows him to score political points.
• A signing ceremony in the U.S. could have costs for Trump. The president may be eager to welcome Xi. But the realpolitik wing of his administration, those hawks like Vice President Mike Pence and Secretary State Mike Pompeo, have stepped up attacks of China in recent weeks. Their common call is for a clear-eyed America to treat China as the Communist authoritarian state it is rather than the transitioning and rising economy previous administrations imagined. That view is widely shared in Washington and going into 2020 Trump’s campaign is eager to exploit his toughness on China. Celebrating Xi in any way would undermine that.
• It may not be good politics for Xi either. To travel to America to sign a deal with the man many at home believe to be leading an effort to contain a rising China risks putting Xi in the role of supplicant. He is arguably China’s most powerful leader in a generation. But everyone has critics.
• That means Xi needs to use Trump’s desire for a U.S. signing as leverage. Within the negotiations that could lead China to insist on further tariff withdrawals by the U.S. Already assumed is that the mini deal will mean Trump not going ahead with a Dec. 15 tranche of tariffs. But Xi could demand a rollback in tariffs on $110 billion in imports from China that went into effect Sept. 1. He also could demand meaningful concessions for Huawei or other blacklisted Chinese companies. And there might be pressure on Trump to mark the occasion with the trappings of a formal state visit — something that would unnerve China hawks in Washington.

This deal may still get done. It may even get done and signed quickly. But there’s plenty of reasons to believe the schedule could slip at the very least. And that the equation is changing. 

Charting the Trade War

China secured the World Trade Organization’s go-ahead to impose $3.6 billion in sanctions against the U.S., in a case that predates the tariff war between the world’s two largest economies but may add a layer of tension to ongoing talks.

Today’s Must Reads

• Avoiding car tariffs | The U.S. may not need to put tariffs on auto imports this month after “good conversations” with companies in the EU, Japan and elsewhere, Commerce chief Wilbur Ross told Bloomberg TV. 
• Easy USMCA | U.S. House Speaker Nancy Pelosi told Bloomberg that Trump’s new Nafta agreement is the “easiest trade deal that we’ve ever done” and “I’d like to have it done as soon as it’s ready.”
• Asia mega deal | Asian leaders plan to sign the world’s largest regional trade deal next year without India if the country is not ready to join, a Chinese foreign ministry official said.
• Keeping promises | European companies are boosting pressure on China to go beyond rhetoric at this year’s China International Import Expo, asking for “more tangible outcomes.” 
• Waiver wishes | Apple is seeking exclusions from Trump’s tariffs that went into effect Sept. 1 on components from China. Fitbit is shifting manufacturing operations out of China but wants a waiver until then. 

Economic Analysis

• New Nafta | The three-nation trade deal will need more than a House majority for a floor vote.
• Flashing red | Early indicators pointed to further weakness in China’s economy in October.

Coming Up

• Nov. 5: U.S. trade balance
• Nov. 7: Australia trade balance
• Nov. 8: China, Germany and France trade balances

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

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