On June 29, a meeting between Chinese President Xi Jinping and the U.S. President Donald Trump was held at the G20 summit in Osaka. The global market paid high attention to this meeting, and was eager to know whether the world's two largest economies would be able to reach a trade agreement to effectively end the trade war, and whether the trade war, widely regarded as the biggest uncertainty that is affecting the global economy can be reduced or eliminated.
After the meeting, the official information released by China stated that the two heads of state agreed to jointly advance a U.S.-China relationship featuring coordination, cooperation and stability. President Xi Jinping said that although there are some differences between China and the United States, they should not fall into the trap of confrontation. Concerning economic and trade issues, Xi Jinping emphasized that China is sincere in its interest to continue negotiations with the U.S., though such negotiations should be based on equality and mutual respect in order to resolve their respective concerns. Meanwhile, it is vital for China to safeguard its core interests on issues involving China's sovereignty and dignity. The differences between China and the U.S. will ultimately be resolved through dialogue, where both sides would be able to seek mutually acceptable solutions. Xi Jinping also stressed on China's hopes that the U.S. could treat Chinese enterprises and students fairly.
The Chinese quoted President Trump as saying that he holds no hostility against China, and that he hoped that the relations between the two countries will get better. The United States and China will jointly promote the relations based on coordination, cooperation and stability in accordance with the principles and directions set by the two heads of state, and expressed the mutual belief that the meeting between U.S. and China will greatly promote the development of the relations between the two nations. Regarding economic and trade issues, Trump said that the U.S. hopes to properly resolve the trade balance between the two countries through consultations and providing fair treatment for enterprises across both countries. One action that the U.S. will take is to cease imposing new tariffs on Chinese exports. It is also hoped that China can increase imports from the United States. The U.S. is willing to reach a mutually acceptable trade agreement with China. Trump also stated that there are many excellent students in China and the U.S. has always been welcome to Chinese students.
The official information by the United States also provides new and additional supplementary information: (1) Trump said that in G20 meeting between the leaders of U.S. and China went far better than what have been expected, and if the correct agreement is eventually reached, China and the United States can become strategic partners to help each other. However, he seems to be in no hurry to reach an agreement. Trump tweeted that, "the quality of the transaction is far more important to me than speed", "I am in no hurry, but things look very good". (2) The "no increase in tariffs" refers only to new commodities. Trump stated that at least for the time being, the U.S. will not raise the tariff level on China, and will not impose new tariffs on the remaining US$350 billion in goods, despite the fact that they can do so. (3) China will purchase U.S. food and agricultural products. In Trump's words, "China is going to start — they're going to be consulting with us, and they're going to start spending money, even during the negotiation, to our farmers". (4) Trump stated that U.S. companies can continue to sell products to Huawei.
Judging from the information on the G20 talks between the leaders of the two countries, the following points are worth noting:
Firstly, as far as this round of meeting is concerned, the most substantial progress is that China has used the market as leverage for the United States not to increase tariffs temporarily. The United States will no longer impose a 25% tariff on the remaining US$ 350 billion of Chinese-produced goods as it previously claimed. China will therefore certainly not impose retaliation. However, the previous tariffs on US$ 250 billion of Chinese goods have not been cancelled yet. China's realistic "consideration" is to import U.S. food and agricultural products as soon as possible, and to increase the purchase of U.S. goods in the future.
Secondly, Trump's "no hurry" attitude deserves attention. Trump has announced his re-election campaign. Why is it that the U.S.-China trade agreement that could well bring benefits to the U.S. economy is something that should not be done in "hurry"? Is this a negotiation strategy, or does it mean that the U.S.-China agreement is unimportant? We believe that other than being a negotiating strategy, there could very well be another reason behind this "no hurry" attitude. This reason is to prevent the U.S.-China trade war from continuing to deteriorate. This is measurable benefit and will reduce the uncertainty the U.S. economy now faces. This is also a move welcomed by Wall Street and American tech companies. Anbound's researchers have previously analyzed that the G20 summit between China and the United States may be held in a "British-style model", that is both sides are not taking things hurriedly. From the Chinese perspective, although this model may cause the United States' efforts not bringing concrete results, and it might also be "lethal" to China.
Thirdly, the influence of the attitude of the American business community on Trump is increasingly greater. Not long ago, more than 600 American companies, including Wal-Mart, urged Trump not to impose additional tariffs, and warned that the move could cause 2 million Americans to lose their jobs. Then there were tech titans such as Apple that spoke up, persuading Trump not to fight the tariff war. The collective attitude of the business community is clearly one of Trump's current views that he has to pay significant attention to as well. To seek for his re-election, it is clear that Trump must pay attention to both economic results and Wall Street's attitude.
Fourthly, Huawei's issue is now linked to trade negotiations. The U.S. legal and political circles oppose tying the Huawei issue with trade matters, and this shows the independence and non-political nature of the American legal system. However, the talks not only mentioned Huawei's problems. In addition, Trump has also decided to temporarily relax the pressure on Huawei. This has made Huawei and trade issues part and parcel of the whole issue. Trump's move may be subject to some opposition within the United States, but it has fulfilled his previous thinking that what the U.S. government did to rope the Huawei issue in as part of its trade negotiations with China could be a "good thing".
Fifthly, the resumption of negotiations between China and the United States does not mean that all issues have been resolved. Any future trade talks are still facing great uncertainties. The tortuous process of U.S.-China trade negotiations shows more of such uncertainties. There is even a likelihood that repeated processes could happen again in the future. The Eurasia Group, a political and economic risk think tank, sees that China has only a 45% chance of reaching a trade agreement this year. Some foreign institutions believe that the trade talks are only a "temporary time-out" of the trade war, but they offer no clear path to end U.S.-China trade war. It is worth noting that even if the U.S.-China negotiations proceed smoothly, the phenomenon of investment transfer, industrial chain and supply chain adjustment, which is unfavorable to China, will continue to occur. This is because the business community will not wait passively for adjustments only when the risks happen.
The U.S.-China meeting in the G20 summit has become the focus of the world, but this is only a node, and represents a phenomenal expression of the long-term competitive game between China and the United States. As it has been previously analyzed by Anbound, the U.S.-China economic and trade conflict is a long-term issue. Even if this agreement is finally reached, it may be difficult to change the characteristics and trends of long-term friction and conflict between these two powers. In fact, the U.S.-China relations have reached a stage where globalization has changed from flourishing in the past to its current intensification of contradictions and conflicts. The deep-seated changes in American society and the excessive production in the world are all long-term problems caused by long-term structural defects in the world economy. Rationally speaking, it is impossible to solve these long-term problems through a single trade agreement. In this sense, even if the United States falls into a "post-Trump era," all kinds of problems in the world will still occur, and long-term economic and trade conflicts between China and the United States will remain for some time to come.
Final analysis conclusion:
Overall, the G20 summit meeting between China and the United States restarted the hitherto suspended trade negotiations. The two countries have now reached a consensus on the opening of the Chinese market in exchange for the U.S.'s suspension of tariffs. However, on whether the two countries can finally reach an agreement is still quite uncertain. Looking from a historical point of view, the U.S.-China trade conflict is one of the long-term problems caused by the structural defects of the world economy, and it cannot be completely resolved simply by reaching a trade agreement alone.
