Trump and Xi Call Time (For Now) on Their Trade War

(Bloomberg) --

Did Xi Jinping and Donald Trump just get a win-win?

The presidents of the world’s two biggest economies today struck a truce in their trade war, meeting on the sidelines of the Group of 20 summit in Osaka, Japan. It’s the second time they’ve used their personal rapport (Trump called the Chinese leader a “great leader” and friend) to revive talks after an impasse.

The biggest takeaways: The truce is open-ended, giving both sides some breathing space. Trump is willing to let U.S. companies again sell some products to Chinese tech giant Huawei. And he’s leaving a bigger decision on the fate of the company, which the U.S. has called a national security threat, until the end of the broader trade talks.

Trump, with an eye on re-election, spoke repeatedly in Osaka about how getting a deal with China on trade would benefit U.S. farmers. Xi, meanwhile, gets a reprieve on a trade war that’s damaging his economy and can talk up his negotiating credentials at home.

But there are still risks in a high-stakes game for the global economy.

The 2020 vote will play a big role in how things move forward. Trump has bet so far the economy — and stock market — will hold up despite the trade tensions. And Xi must decide whether he would get a better deal with Trump or potentially one of the Democratic candidates, many of whom are advocating an even harder line on China.

Global Headlines

DMZ date  | Even before he left the G-20, Trump’s mind was on his next stop in South Korea, where he said he’s ready to visit the demilitarized zone on North Korea’s border and extended a surprise invite to Kim Jong Un to meet him there, if only “for two minutes.”  Their last meeting in Vietnam earlier this year broke down without a deal over Kim’s nuclear ambitions, and talks have gone nowhere since. North Korea called Trump’s offer a “very interesting suggestion.” 

• Trump spoke admiringly of the DMZ — one of the most heavily-fortified borders in the world — making an implicit comparison with his efforts to construct a wall on the U.S. southern border.

In from the cold | Saudi Crown Prince Mohammed bin Salman enjoyed some public validation from Trump at the G-20. That’s as the U.S. president rebuffs calls from Congress for a tougher stand on the country for its involvement in the war in Yemen and the murder of Washington Post columnist Jamal Khashoggi. Trump referred to MBS, as he's known, as a “friend of mine,” while the prince praised Trump for what he called his economic and political leadership.

Friendly chat | Russian President Vladimir Putin also got his much-sought sit down at the G-20 with Trump, after a year of waiting. A smiling U.S. president told Putin not to interfere in the upcoming U.S. election, though the admonition did not appear to be serious. The two leaders bonded over their shared criticism of the media. The meeting was a win for Putin’s efforts to avoid international isolation. Not everyone was as effusive though in their interactions with the Russian leader.

Trade matters | Japan and the U.S. agreed to speed up trade talks after Trump last month threatened to raise auto tariffs on Tokyo. India and the U.S. plan to start ministerial discussions to sort out their trade differences after Trump this week called on India to withdraw an “unacceptable” increase in tariffs on U.S. goods. Europe and South America’s leading customs union struck a free-trade deal after 20 years of talks, notching up a major win in a global market-opening drive that counters U.S. protectionism.

• Click here for other G-20 news on how Putin agreed with Prince Mohammed to extend the OPEC+ deal at current production levels for the rest of this year and potentially into early 2020.

Missile spat | Trump indicated he may be willing to reassess his threat to sanction Turkey if it proceeds with installing the S-400 Russian missile-defense system. Asked about the sanctions as he sat down with Turkish President Recep Tayyip Erdogan, Trump said: “We’re discussing it. We’re looking at different solutions.” Erdogan said earlier at a meeting with Putin there was no change to the agreement on delivery of the S-400.

`Environmental psychosis' | Efforts to bring climate change onto the agenda at the G-20 were largely fruitless, despite the warnings of leaders in Europe about the need to tackle it as a global issue. Indeed, Brazilian President Jair Bolsonaro told reporters he had raised with the leaders of Germany and France his concern about “environmental psychosis.” That's “when someone thinks the environment should be above all the rest.”

• Click here for how May’s vacation revelation convinced her on climate change, and here for a story on the summit communique (where the U.S. again diverged with other nations on climate matters).

And finally… It wasn't all work (even if the through-the-night communique talks were handled by negotiators known as sherpas). Leaders enjoyed a dinner last night that included boiled pike conger eel, fermented Koji fungus, bamboo charcoal baked Tajima beef and white peach, alongside sparkling sake and Matcha tea. They watched Kyogen, a form of traditional comedic theater that’s been performed for more than 600 years.

--With assistance from Shoko Oda and Daniel Ten Kate.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net

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