Trump-Xi meeting: Why China is hoping to sway US policy of 'strategic ambiguity' over Taiwan

Key Concepts

• US-China Trade Dispute: A period of escalating tariffs and economic tensions between the United States and China.
• Tariffs: Taxes imposed on imported goods.
• Rare Earths: A group of 17 elements crucial for many modern technologies, including electronics and defense systems.
• Fentanyl Precursors: Chemicals used in the production of fentanyl, a potent synthetic opioid.
• Taiwan's Independence: A highly sensitive issue in US-China relations, with China considering Taiwan a breakaway province.
• De-escalation: The process of reducing tensions and conflict.
• Framework for a Trade Deal: An agreement outlining the principles and potential terms for resolving trade disputes.
• Protectionist Policies: Government policies that restrict international trade to help domestic industries.
• Global Market Fragmentation: The division of global markets into smaller, less interconnected segments.
• Stick and Carrot Approach: A negotiation strategy involving both threats (stick) and incentives (carrot).

US-China Presidential Meeting: Trade, Taiwan, and De-escalation

This summary details the anticipated meeting between the American president and his Chinese counterpart, President Xi Jinping, focusing on the key issues of trade, rare earths, fentanyl, and Taiwan, as well as the broader context of de-escalating bilateral tensions.

Trade Dispute and Tariff Negotiations

• Background: The US and China have been engaged in a trade dispute since President Trump's first term, marked by the imposition of significant tariffs.
• Current Momentum: There is growing optimism for a trade deal ahead of the meeting, with both leaders having spoken by phone multiple times this year. This in-person meeting is seen as a crucial factor in a recent US market surge, reflecting market expectations of improved US-China relations.
• Presidential Statements: The American president expressed optimism, stating, "We have China coming and it's going to be very interesting. I have a lot of respect for President Xi and uh we are going to I think we're going to come away with a deal. But u I really feel good. Our country is doing so well economically. It's doing so incredibly well."
• Chinese Perspective: The Chinese foreign minister adopted a more cautious tone, criticizing "politicizing economic and trade issues, artificially fragmenting global markets, and resorting to trade wars and tariff battles."
• Tariff Escalation and De-escalation:
  • Earlier this year, tariffs on China were increased to 145%.
  • Beijing retaliated with duties on US exports reaching 125%.
  • Subsequent talks between officials led to a sharp reduction in tariffs.
  • However, President Trump threatened a new 100% duty on Chinese goods from November, citing restrictions on rare earth exports.
• Averted Tariffs: This threat of a 100% duty appears to have been shelved following an agreement on a framework for a trade deal. As stated by Treasury Secretary Scott Besson, "the president had given me maximum leverage when he threatened 100% tariffs if the Chinese impose their rare earth uh global export controls. So I think we have averted that. So that the tariffs will be averted."

Rare Earths and Fentanyl Precursors

• Rare Earths Leverage: China's potential imposition of export controls on rare earths, essential for US industry, was a significant point of leverage. These controls were initially slated to take effect on December 1st.
• Averted Export Controls: Negotiations, including those in Kuala Lumpur, appear to have averted these more expansive rare earth export controls for at least a year, according to reporting. However, the threat "very much remains in China's arsenal and it kind of looms like a sort of domic over negotiations."
• Fentanyl Tariffs: There is reporting that President Trump is willing to consider fentanyl-related tariffs on China if Beijing commits to a more vigorous crackdown on the export of fentanyl precursors.

Taiwan: A Perennial Sticking Point

• China's Stance: President Xi is expected to request that President Trump state the US opposes Taiwan's independence, not just that it "just opposes Taiwan's independence."
• US Policy: Given the rapid arrangement of the meeting, an official shift in US policy on Taiwan is considered unlikely. US Secretary of State Marco Rubio recently attempted to preempt concerns by stating there would be "no change in official US policy on Taiwan."
• Future Possibilities: The question remains whether President Trump, nearing the end of his term, might be more open to a policy shift. Even if no shift occurs at this meeting, future interactions, including meetings in Beijing and at the G20 summit, will likely see President Xi continue to press this issue.

Negotiation Strategies and Motivations

• De-escalation as a Goal: Both leaders aim to de-escalate tensions, as the past few months have been "very bruising for the economies of both countries."
• No Major Breakthroughs Expected: Senior research and advocacy adviser Ali Wine from the International Crisis Group anticipates no major breakthroughs but emphasizes the importance of the first in-person meeting since President Trump's return to office.
• Expected Outcomes:
  1. Blessing the Trade Framework: The leaders are expected to endorse the framework agreed upon by Treasury Secretary Scott Besson and his Chinese counterpart, establishing a "more enduring trade truth."
  2. Fentanyl Tariff Consideration: Potential for fentanyl-related tariffs in exchange for China's crackdown on precursor exports.
• China's "Stick and Carrot" Approach:
  • Stick: China can wield economic leverage, including rare earth controls and other measures, to impact sectors like agriculture (soybean farmers) and the automotive industry.
  • Carrot: President Xi may appeal to President Trump's desire to be remembered as a "uniquely consequential and visionary peacemaker." By offering the opportunity to "steady bilateral relations" and "end once and for all the prospect of a cross-strait war," China aims to entice President Trump to make a shift on Taiwan policy, a chance not afforded to his predecessors or successors.

Conclusion

The upcoming meeting between the American president and President Xi Jinping is primarily focused on de-escalating the trade dispute and averting further tariff escalations, particularly concerning rare earths. While a comprehensive trade deal framework is expected to be endorsed, significant challenges remain, most notably the sensitive issue of Taiwan. China is employing a dual strategy of economic leverage and appeals to President Trump's legacy to influence outcomes, especially regarding Taiwan policy. The meeting is seen as a crucial step in managing the complex and often fraught relationship between the world's two largest economies.