November 21, 2018 / 3:32 PM / 5 months ago

Breakingviews - G20 showdown hangs on big numbers, big egos

U.S. President Donald Trump and China's President Xi Jinping shakes hands after making joint statements at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Damir Sagolj

WASHINGTON (Reuters Breakingviews) - The relationship between Donald Trump and Xi Jinping hangs on big numbers and big egos. The two leaders’ upcoming meeting in the Argentinian capital as part of the G20 summit is weighing on markets. Despite discord among his aides, the U.S. president has the autonomy to strike a deal if China offers the right incentives.

What’s at stake is whether the world’s two largest economies can call a truce in an escalating trade war. Tough talk from trade hardliners such as U.S. Trade Representative Robert Lighthizer and Vice President Mike Pence over how to handle China don’t reassure. In the past, though, the U.S. president has backed different factions at various times. He’s known to follow his gut instinct, so much depends on what Xi puts on the table. 

Neither leader is as strong as they once were. Trump’s Republican party lost control of the U.S. House of Representatives in the November election. Most major U.S. stock indices have given up this year’s gains. In China, meanwhile, leaders face an economy growing at its slowest since 2009. New loans, which fuel growth, halved in October from the month before.

So what could China offer? While U.S. complaints have focused on Chinese intellectual property theft, the president returns time and again to the $500 billion in goods imported from China. He previously rejected a Chinese offer to buy an additional $70 billion in U.S. goods, but increasing the pitch to $200 billion may be more persuasive. It would halve the bilateral trade gap, which was $375 billion in 2017.

For best results, add flattery. European Commission President Jean-Claude Juncker gave Trump a picture of General George Patton’s grave in Luxembourg and won a surprise tariff ceasefire. China already treated Trump like an emperor during his last trip to Beijing, and has dropped its former habit of giving away pandas. A military-themed memento though – perhaps commemorating America’s role in World War II – could win enough goodwill to spur trade talks.

One thing to watch is whether the two meet in private. The U.S. president declined to criticize Russian President Vladimir Putin in July after an entourage-free tête-à-tête. A two-man show, with a big number and some swag that the U.S. president can carry home, might just calm nerves and markets on both sides.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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