U.S-China Brawls Cut Chance of Trade Deal

(Bloomberg) --

Culture wars. Visa bans. Black-listed companies. The National Basketball Association pulled into the mother of all disputes. And that’s just the opening salvos.

Chinese and U.S. negotiators are due to sit down tomorrow in Washington and talk about ways to end a trade war that’s dragged on — causing economic damage on both sides — for more than a year.

In an environment of escalating tit-for-tat between the world’s two biggest economies, the prospects for a breakthrough are slim. The U.S. is pressing on China’s hot buttons of governance and human rights, and President Donald Trump has hinted at linking the trade tensions with Beijing's crackdown on pro-democracy protesters in Hong Kong.

Even without the other noise, the issues are complex. The U.S. wants China to agree to changes in the way it manages state enterprises and intellectual property. Beijing favors a much narrower focus on trade in goods and helping the U.S. winnow its deficit.

Beijing is still open to a partial deal, an official says. If no more tariffs are imposed (one round is due to take effect this month), China would offer more purchases of agricultural products.

That may not be enough for the Americans. As Trump battles an impeachment effort at home and the 2020 election turns increasingly fraught, he needs a big win. And the broader fight between the U.S. and China for dominance will last long after Trump has left.

Global Headlines

Stonewalling | The White House delivered its most forceful response yet to the impeachment inquiry into Trump, sending a letter to House Speaker Nancy Pelosi declaring the Democrats’ effort unconstitutional and saying neither the president nor his administration would take part. Trump, whose strategy appears to be to slow the efforts to a crawl by refusing requests for witnesses and documents, is separately working to smooth things over with allies on Capitol Hill after he canceled the scheduled testimony of a key diplomat at the center of the probe.

• New polls show a majority of Americans support the impeachment push but are also wary about removing Trump from office.

Going in | Turkish troops began crossing into Syria, an official said, as Ankara seeks to push back Kurdish militants days after the U.S. said it wouldn’t stand in the way of an incursion. Soldiers will be supported by the Free Syrian Army, presidential communications director Fahrettin Altun said earlier today. Meanwhile, the Kurdish forces said they would move to defend their “own people,” suggesting they’d focus less on the fight against Islamic State.

Brexit rage | Divorce talks have devolved into rancorous recrimination, as U.K. and European leaders focus on blaming each other for refusing to budge on a deal for Britain to exit the EU. A summit in Brussels next week could be the last chance ahead of the Oct. 31 deadline to avoid the U.K. crashing out in a way that risks economic havoc.

Nightmare scenario | The rollout of 5G technology will boost the “attack paths” for hackers or hostile states to gain control of everything from electricity grids to police communications, the EU says in a new report. It doesn’t name China or its tech giant Huawei but, as Nikos Chrysoloras and Helene Fouquet explain, the risk assessment warns against relying on telecom equipment from a single supplier, especially from a country with poor democratic standards.

Fresh spat  | Brazil accused France of blocking it from a key international environmental body, just weeks after their leaders traded insults over wildfires that were ravaging the Amazon, destroying forests and creating severe air pollution. As Samy Adghirni and Simone Iglesias report, Brazil was told it cannot for now take part in the OECD committee, which it says is “due to a veto from just one country: France.”

What to Watch

• Hundreds of protesters flooded a Hong Kong court today to support the appeals case of a jailed activist, with the subway system set to close early for the sixth straight day.
• Tunisia is due to release parliamentary election results today that are expected to give the North African nation’s moderate Islamist party Ennahda the lead but not enough votes itself to form a ruling coalition.

Tell us how we’re doing or what we’re missing at balancepower@bloomberg.net.

And finally ... South Africa’s economy was roaring along in 2007 on the back of the global commodities boom when power shortages hit. State utility Eskom approved 13 projects that year worth more than $13.2 billion, with two flagship coal-fired power stations that were expected to be finished in 2015. But, as Paul Burkhardt and Michael Cohen explain, a bungled execution of the plants has caused delays leading to rolling blackouts that have left the economy in deep trouble and presented a huge headache for President Cyril Ramaphosa.

--With assistance from Kathleen Hunter.

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

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