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By DOUG PALMER, WENDY WU and JAKOB HANKE
With help from Anita Kumar, Kristin Huang and Catherine Wong.
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— U.S. President Donald Trump appears set to delay imposing tariffs on an additional $300 billion worth of Chinese goods after a meeting on Saturday with Chinese President Xi Jinping, but any truce could come with conditions attached.
— Trump is also demanding that India lift tariffs, ahead of a meeting with Prime Minister Narendra Modi on Friday.
— French President Emmanuel Macron is not happy about all the focus on a US-China ceasefire truce, and is looking for a global trade deal and assurances about environmental policy.
KONNICHIWA FROM JAPAN. AND WERE OFF! Welcome to your daily G20 briefing from the muggy city of Osaka, a fitting venue for trade aficionados, as it was once the grimy heart of Japans 19th century industrial revolution, when it was dubbed “the city of smoke” and even the “Manchester of the Orient.” Now, its cleaned up and is well and truly in the space age. Our colleague Kristin Huang from the SCMP notes that Japan is using the G20 to flaunt its cutting edge technology, from robotic hands to blood pressure sensors. The latter might well come in handy over the coming days, but, fear not, well be here to guide you all the way. This newsletter is a joint production of POLITICO Europe, POLITICO and the South China Morning Post.
World leaders, accompanied by the usual swarm of reporters, are gathered here for the 14th G20 summit since 2008. As in Buenos Aires last year, a meeting between Trump and Xi threatens to upstage the rest of the gathering (much to the chagrin of the French). Despite all of the talk of a U.S.-China decoupling, Im reminded of the 1975 hit by Neil Sedaka “Breaking Up Is Hard to Do.” Or maybe Tammy Wynettes D-I-V-O-R-C-E is the better call.
THE TRUCE IS OUT THERE: Before leaving Washington on Wednesday, Trump told the Fox network that the outcome of Saturdays meeting with Xi was still up in the air. Indeed, he explained he was perfectly happy for talks to either result in a ceasefire or more tariffs. He did, however, suggest that he could impose a 10 percent tariff on the additional $300 billion worth of Chinese goods, instead of the 25 percent he vowed earlier.
But people in Washington and Beijing following the negotiations said Trump had already agreed to put additional tariffs on hold so the two sides could resume talks. “Trump agreed to hit pause on $300 billion to get the meeting with Xi. He would not have gotten it otherwise,” one said.
Derek Scissors, a China policy expert at the American Enterprise Institute, said the short time to prepare for the meeting after Xi and Trump spoke by phone last week made a delay in the tariffs the most likely outcome. “But President Trump has been known to sharply change direction on short notice,” Scissors said.
So, the deals done? Well, the Wall Street Journal reported that it may not be plain sailing. It reported that Xi plans to present Trump with a list of demands for reaching a deal, including the removal of a ban on the sale of U.S. technology to Chinese telecommunications giant Huawei. Beijing also wants the U.S. to lift all punitive tariffs and to drop efforts to get China to buy even more U.S. exports than Beijing said it would when the two leaders last met in December, the newspaper reported
Mood music: Publicly, China was certainly signaling an appetite to cool off for a while. Ministry of Commerce Spokesman Gao Feng told reporters in Beijing on Thursday that China always opposed unilateral moves to levy additional tariffs and would welcome “actions that are helpful for managing differences and avoiding trade dispute escalation.” Asked specifically about whether China and the U.S. will agree to a trade war truce, Gao said detailed information will be released later.
Not on message: In another sign that its unwise to call this one too early, the large press corps that accompanies Xi has no clear message yet. Their job is to put a positive gloss on proceedings, but Chinese officials arent issuing a read-out while theres still such uncertainty about what will actually transpire at the Xi-Trump meeting. And with Trump, you never know.
Easy conversations over dinner: Trump will have dinner with Australian Prime Minister Scott Morrison shortly after arriving in Osaka today. His other bilaterals over the next two days include Japanese Prime Minister Shinzō Abe, Indian Prime Minister Narendra Modi, German Chancellor Angela Merkel, Russian President Vladimir Putin and leaders from Brazil, Saudi Arabia and Turkey.
“Im heading to Japan, Osaka, and were going to be meeting with a lot of people from different countries, many of whom have been taking advantage of the United States, but not so much anymore, in fact not at all anymore,” Trump told reporters before he left.
Right. So no problems anywhere, then.
A message from Demosistō: Hong Kong is a top destination for FDI and the EU is Hong Kongs second largest merchandise trading partner. A proposed extradition law in Hong Kong has brought 2 million citizens to the street, yet the government refused to withdraw the bill and has stigmatized the peaceful protests as riots.
FRANCES MACRON CALLS FOR GLOBAL DEAL ON TRADE: French President Emmanuel Macron, the Napoleonic showman of European politics, isnt too happy with all the emphasis on Trump and Xi. He called on China and America to agree to strong multilateral rules as part of the G20 talks, rather than solving their conflict in a bilateral agreement that would exclude the EU. Never one to enjoy sitting on the sidelines and watch the Trump-Xi show, Macron will feel obliged to hit back after Trumps assertion on Wednesday that “Europe treats us worse than China.” The French leader stressed that Trump had to stop bullying countries then demanding deals. “Trade is not a game,” he said.
EU leaders have said they feared that a bilateral China-U.S. deal could come at Europes expense, for example if Beijing agrees to buy more Boeing rather than Airbus planes, or if Xi agrees to better protect the intellectual property of American firms only.
“We would be wrong to have a soft [G20] statement on trade because we would let the world trade issue be played out next door in a bilateral. Its not good for us [the EU and France] and not good for the protagonists [China and the U.S.] either,” Macron said.
Time for a fight: Any agreement on matters like subsidies, overcapacity, intellectual property should be done globally, rather than in a China-U.S. deal only. “Thats what were going to fight about”, Macron said. “I think it is a methodological mistake to address international trade through a series of bilateral agreements … The reality of world trade is that it is not a series of bilateral relations. What youre carrying with you, the phones, is done globally … in the components of this phone, there is the United States, there is China, there is Europe, there are other continents. It doesnt solve the whole issue.”
Wish list: Arguing that “the G20 must have a strong say in restoring the credibility of multilateralism,” Macron said France wanted the G20 to agree to:
1) “solving the problem of overcapacity in sectors such as steel”
2) “protecting intellectual property”
3) dealing with “the problem of state subsidies”
4) “structuring” and “improving” the WTOs dispute settlement body
5) creating “coherence between our trade agendas, social agendas and environmental agendas”
FRANCE ALSO INSISTS ON ENVIRONMENTAL CLAUSES: And hes not done. Macron has also warned that France would not sign the G20 declaration unless it mentions the Paris climate agreement. “There are many people nowadays who dont want to sign communiqués at the G7 or G20 because they have red lines. Well I have a red line. If we dont speak about the Paris agreement, and if, in order to get an agreement in a room of 20 [leaders], we are not able anymore to defend our climate ambitions, it will be without France,” Macron said in Japan before the official start of the G20.
More concretely, French officials told us on Thursday, Frances “red line” was that there could be “no backtracking” on previous environmental commitments. That formulation leaves a door open for the United States to negotiate a carve-out, as it did in previous summits, notably the G20 in Hamburg.
Currently, the draft declaration does mention the Paris agreement twice, so Frances conditions should be met. he draft statement seen by POLITICO reads: “We welcome the successful adoption of the implementation guidelines for the Paris Agreement … and are determined to make best use of this momentum, including in events such as the Climate Action Summit of the U.N. Secretary-General. In particular, we look forward to successful outcomes of COP25, which will herald the implementation of the Paris Agreement from 2020.”
TRUMP DEMANDS INDIA LIFT UNACCEPTABLE TARIFFS: U.S. Secretary of State Mike Pompeo and Trump appear to be playing “good cop, bad cop” this week on India trade.
During a visit to New Delhi on Wednesday, Pompeo glossed over the friction caused by Trumps move to kick India out of the Generalized System of Preferences program and Modis decision to move ahead with long-delayed retaliation to U.S. tariffs on steel and aluminum.
“Look, I know the GSP is a big deal to India,” Pompeo said in an interview with India Today. “Im confident that when two countries of goodwill work together that we can work our way through this.” “There are tariffs and counter-tariffs,” Pompeo added during a press conference with Indian Foreign Minister Subrahmanyam Jaishankar, “and we said were going to do our best to … work through these problem sets.”
But Trump, on his way to the Osaka meeting, took a much firmer tone. “I look forward to speaking with Prime Minister Modi about the fact that India, for years having put very high Tariffs against the United States, just recently increased the Tariffs even further,” Trump wrote on Twitter. “This is unacceptable and the Tariffs must be withdrawn!”
Tariff Man vs. Tariff King: Trump, who describes himself as a Tariff Man, last year called India “the Tariff King” because of its high duties on U.S. products. He also spoke enthusiastically of reaching a deal with New Delhi to lower those barriers, only to take the drastic step in May of suspending India from the GSP program after negotiations failed.
XI URGES TRUMP AND KIM TO MEET AGAIN: Xi told South Korean President Moon Jae-in today that he would call on Trump to hold a third summit with North Korean leader Kim Jong Un and show flexibility in resolving tensions over Pyongyangs atomic program, CCTV reported. Xis remarks came after his unprecedented state visit to Pyongyang last week. Xi said Kims willingness to denuclearize remained solid and he reaffirmed Beijings commitment to political engagement with North and South Korea.
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