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Trump and Xi to meet at the G-20

AXIOS , Bill Bishop

Photo: Xinhua/Li Tao via Getty Images

 

Trump and Xi had a phone call Thursday and look to have confirmed a meeting at the end of the month.

The South China Morning Post says it will be a "meeting plus dinner," and Bloomberg says that Trump has asked his cabinet to draft a possible trade deal with China."Trump asked key cabinet secretaries to have their staff draw up a potential deal to signal a ceasefire in an escalating trade conflict, the people said, adding that multiple agencies are involved in the drafting of the plan. It was unclear if Trump was easing up on U.S. demands that China has resisted," Bloomberg reported.

By the numbers:

Markets and the RMB liked the news of talks, as the currency had its biggest two-day gain since 2007. Hong Kong surged more than 4% and Shanghai went up more than 2.5%.Meanwhilethe US trade deficit with China rose to a monthly record high in September:"The Commerce Department said on Friday the trade gap increased 1.3 percent to $54.0 billion, widening for a fourth straight month. Data for August was revised to show the trade deficit rising to $53.3 billion instead of the previously reported $53.2 billion."

Between the lines: It sounds like the two sides are still far apart on a deal.

If there is a positive outcome from the meeting, it is likely to be a framework deal that involves a tariff cease fire and a roadmap for talks. That seems to be what the Chinese side sees as the most realistic positive outcome.Even if we see a trade deal, expect it to be a short-term, superficial salve to the fundamentally deteriorating U.S.-China relationship, and that Xi et al will see it and leverage it as a delaying action while China ramps up its efforts to reduce reliance on the U.S. and build up its comprehensive national power to better compete with the U.S.

The big picture: The trade dispute is just one dimension of the fundamental resetting of the U.S.-China relationship, and even if there is a trade deal some time in the future, the other issues, including but not limited to Taiwan, South China Sea, and interference/influence have little prospect of resolution any time soon.

Go deeper: China's Xi promotes 'self-reliance' as next economic era:

“Trade frictions with the U.S., and particularly the near-collapse of ZTE, has reinforced Chinese leaders’ instinct for technological autarky,” said Yanmei Xie of Gavekal Dragonomics, an economic research firm.

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