To hear United States President Donald Trump tell it, he was made for a moment like this: a high-stakes face-off. A ticking clock. A cagey adversary.
The man who calls himself a supreme deal-maker will have the opportunity this week to put himself to the test. The question is whether he can defuse a trade war with China that is shaking financial markets and threatening the global economy and perhaps achieve something approximating a breakthrough.
Trump is to meet with his Chinese counterpart, Xi Jinping, during the Group of 20 summit in Buenos Aires, Argentina, on Friday and Saturday. Unless the two leaders can achieve a truce of sorts, their conflicts will likely escalate: On Jan 1, the tariffs Trump has imposed on many Chinese goods are set to rise from 10 per cent to 25 per cent, and Beijing would likely retaliate.
Most analysts say they doubt Trump and Xi will reach any overarching deal that would settle the dispute for good. The optimistic view is that the two sides may agree to a cease-fire that would buy time for more substantive talks and postpone the scheduled escalation in US import taxes.
Yet no one really knows. Each side seems prepared to wait out the other in a conflict that could persist indefinitely.
Explore: Trump’s trade war
In advance of the meeting, Trump has sounded his usual note of boastful confidence. Speaking to reporters on Thanksgiving Day, he said: “I'm very prepared. You know, it's not like, 'Oh, gee, I'm going to sit down and study.' I know every stat. I know it better than anybody knows it. And my gut has always been right.”
Most trade analysts, however, are sceptical that any significant agreement is likely this week.
“Expectations should be very low,” said Wendy Cutler, vice president of the Asia Society Institute and a former US trade official who negotiated with China. “We need to be very clear-eyed. It's going to be a very difficult negotiation. The issues at hand don't lend themselves to quick solutions.”
The trade war erupted last fall after Trump imposed import taxes on $250 billion of Chinese goods, and Beijing retaliated with tariffs on US exports.
The justification for the US move, according to Trump, is that Beijing has long deployed predatory tactics in its drive to supplant America's technological dominance. The administration alleges and many trade experts agree that Beijing hacks into US companies' networks to steal trade secrets and forces American and other foreign companies to hand over sensitive technology as the price of access to China's market.
Beijing disputes those allegations and asserts that Trump's sanctions are merely an effort to hinder an ambitious rival.
Besides the scheduled escalation in US tariffs on $200 billion in Chinese goods an additional $50 billion in Chinese imports already face the higher tax another threat looms: Trump has threatened to tax $267 billion more in Chinese imports. At that point, just about everything Beijing ships to the United States would face a higher import tax.
Growing concerns that the trade war will increasingly hurt corporate earnings and the US economy are a key reason why US stock prices have been sinking. As of Friday's close, the Standard & Poor's 500 index has shed roughly 10 of its value since setting a record high Sept 20.
Joining other forecasters, economists at the Organization for Economic Co-operation and Development last week downgraded their outlook for global economic growth next year to 3.5 per cent from a previous 3.7 per cent. In doing so, they cited the trade conflict as well as political uncertainty.
Some big US companies, in reporting quarterly earnings in October, warned that they were absorbing higher costs from Trump's increased tariffs, which have been imposed not only on Chinese goods but also on imported steel and other goods from other countries.
“We need some certainty,” said Craig Allen, president of the US-China Business Council and a former American diplomat. “The US and China cannot go into a trade war and not affect global markets ... We need to resolve our differences.”
Yet as Trump and Xi prepare to meet, the backdrop is hardly encouraging. Acrimony between the two sides disrupted this month's Asia Pacific Economic Cooperation summit in Papua New Guinea. The 21 APEC countries, torn by differences between Beijing and Washington, failed to agree on a declaration on world trade for the first time in nearly three decades. Vice President Mike Pence and Xi sniped at each other in speeches.
Then last week, US Trade Rep. Robert Lighthizer issued a report charging China's efforts to steal US trade secrets have “increased in frequency and sophistication” this year despite American sanctions.
“China fundamentally has not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed appears to have taken further unreasonable actions in recent months,” the report concluded.
The tenor of the report suggested that the US would take a hard line into this week's talks. In the meantime, “the amount of uncertainty is unprecedented and very disquieting to the markets", said Allen of the US-China Business Council.
Trump himself sought on Monday to increase the pressure on China. In an interview with The Wall Street Journal, Trump said it was “highly unlikely” that he would agree to Beijing's request to suspend the tariff hikes that are set to take effect Jan 1. And he repeated his threat to target an additional $267 billion in Chinese imports with tariffs of 10 per cent or 25 per cent.
Clouding the outlook are mixed messages from the Trump administration. The White House appears divided between hawks like Trump's trade adviser, Peter Navarro, and free traders like the top White House economic adviser, Larry Kudlow. On Nov 9, Navarro delivered a combative speech suggesting that Trump didn't care what Wall Street thought of his confrontational China policy.
Four days later, Kudlow went on CNBC and dismissed Navarro's remarks as "way off base".
"They were not authorised by anybody,” Kudlow said. “I actually think he did the president a great disservice.”
Regardless of which approach Trump takes to Buenos Aires, Trump and Xi don't have to resolve their differences this week. A cease-fire that suspends any further escalation of the US tariffs wouldn't be unprecedented. The administration and the European Union, for instance, reached a truce last summer that suspended threatened US tariffs on European auto imports.
“My personal guess — and I'm sticking my neck out here — is that there will be some kind of cease-fire agreed to,” said Matthew Goodman, a senior adviser on Asian economics at the Center for Strategic and International Studies.
Goodman noted that Trump appears concerned about tumbling stock prices, and Xi is contending with a decelerating Chinese economy. A truce would bring at least a temporary calm.
“No one is expecting they will come out with a solid agreement,” said Quincy Krosby, chief market strategist at Prudential Financial. “What the market wants what the market needs is a sense that they are negotiating and that the negotiations will continue.”