With US-China relations on a tightrope, Biden and Xi’s rendezvous is more important than ever
It has been a year since President Xi and President Biden last met, and it’s hard to overstate just what a rollercoaster US-China relations have been on since then.
The fact this meeting is happening at all is the result of months of delicate planning.
But for all the “tough-line”, “hard-man” images that both men try to broadcast domestically, there is a mutual recognition of one key fact: it would cost more, both politically and economically, to allow relations to spiral.
Why now?
It was just nine months ago that US-China relations hit what felt like rock bottom as the so-called Chinese spy balloon was shot down over the US, plunging their diplomacy into crisis.
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Moment ‘spy balloon’ is shot down
The vast backdrop of disagreements from Taiwan, the Indo-Pacific, the Ukraine war, tech controls and economic sanctions meant the relationship felt as precarious and as dangerous as it had in decades.
But the summer has seen a blitz of diplomatic efforts to try to repair things, with multiple meetings of officials at various levels.
Both sides know the window for progress is narrow.
Come next year, Taiwan’s presidential election will likely inflame tensions, and then the inevitable anti-China sentiment that will accompany the US election cycle will no doubt make things worse.
The time to play statesmen and to push for their interests is now!
What do they want?
Don’t be under any illusion, both Biden and Xi are coming to this table with immense amounts of scepticism about the other’s intentions.
Any meaningful breakthrough is highly unlikely.
What they both seek is a degree of what’s being called “tactical stabilisation” – a pause in deterioration that will allow each to pursue its interests in a more predictable environment.
On the US side, there is an understanding that only a meeting of the top men will unlock the Chinese system to enable cooperation on some of the “easier” issues like climate change and global health.
There is also a hope that military-to-military talks might be able to restart after being shut down following former Speaker Nancy Pelosi’s controversial visit to Taiwan last year.
From China’s perspective, a pause in deterioration gives it the space to continue to build up its economic and military strength to better compete going forward.
The visuals are also important to Xi Jinping domestically.
It has not been a brilliant year for him, with a chaotic end to his hated zero COVID policy, a faltering economy and deteriorating relations with multiple western countries. Being seen to be able to manage this crucial relationship is important to casting himself as a competent statesman.
So what will they discuss?
There are so many disagreements likely to be raised, but these are the top three on the list:
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China and US meet to ease tensions
Territorial claims and military tension
Perhaps top of the long list of issues between them is China’s increasingly assertive behaviour in contested areas that it claims as its own.
Most prominent is Taiwan, the self-governing island that China sees as a breakaway province. Xi has expressed multiple times his desire to “reunify” Taiwan, Biden has promised to defend it.
The other arena where tensions are rising is the South China Sea.
China claims the vast majority as its international waters, despite rival claims from the Philippines and others. In 2016, an international arbitral tribunal ruled overwhelmingly in favour of the Philippines.
However, in recent months there have been frequent confrontations between Chinese and Filipino vessels, and here too the US has reiterated its commitment to support the Philippines.
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Boats from China and Philippines collide
The US claims that in both areas China’s behaviour is becoming increasingly aggressive and, in some cases dangerous. It has released videos of Chinese jets flying hair-raisingly close to US ones, in one recent case, just 10ft away.
The Americans say the risk of accidents and escalation is grave.
China, for its part, says that it is US conduct that is the dangerous force. It sees American presence in these regions as blatant provocation in its backyard.
These are deeply intractable issues, the best that might be hoped for is some sort of agreement to an offramp for if things ever escalate.
Global conflicts
The two leaders will also discuss the two major ongoing global conflicts in Ukraine and the Middle East.
In both, they have taken a drastically different tact.
When it comes to Ukraine, China has attempted to portray itself as a neutral peacemaker, one of the only nations with the ability to talk to both sides.
The reality, though, is that Xi has made no secret of his growing closeness to Putin and has quietly been providing Russia with finance, technology and diplomatic cover.
Xi has made no secret of his growing closeness to Putin. Pic: AP
Meanwhile, in the Middle East, it has called for a ceasefire and peace, but it has stopped short of directly condemning Hamas for the 7 October atrocities and state media has taken a decidedly pro-Palestinian tone.
In both cases, China’s approach is in stark opposition to America’s, and it has criticised its rival for its full-throated support for both Israel and Ukraine and the supply of military assistance.
At root, both have an interest in the other not gaining advantage or influence off the back of the outcomes of these conflicts.
Tech and economic sanctions
There is still a raft of restrictions on technology and economic sanctions that exist between them.
Just in the last month, new ones have been announced on both sides, with China restricting US access to graphite (a crucial component in making batteries) and the US further restricting Chinese access to semiconductors.
The aim on both sides is to hinder the other’s ability to develop in key areas such as AI. But this trade war hurts them both as they remain major trading partners and the two economies are highly reliant on each other.
Xi in particular has a need to mitigate these issues.
Amidst a flagging economy, he is trying to woo foreign investment back to China and is expected to meet with US business leaders while in San Francisco.
A smooth summit might help him stave off, at least temporarily, more US restrictions and it may help shore up the confidence of some foreign businesses spooked by the imposition of state-centric restrictions and raids on a handful of China-based US businesses.
US
Financial markets were always going to respond to Trump tariffs but they’re also battling with another problem
Stock markets around the world fell on Thursday after Donald Trump announced sweeping tariffs – with some economists now fearing a recession.
The US president announced tariffs for almost every country – including 10% rates on imports from the UK – on Wednesday evening, sending financial markets reeling.
While the UK’s FTSE 100 closed down 1.55% and the continent’s STOXX Europe 600 index was down 2.67% as of 5.30pm, it was American traders who were hit the most.
Trump tariffs latest: US stock markets tumble
All three of the US’s major markets opened to sharp losses on Thursday morning.
The S&P 500 is set for its worst day of trading since the COVID-19 pandemic. File pic: AP
By 8.30pm UK time (3.30pm EST), The Dow Jones Industrial Average was down 3.7%, the S&P 500 opened with a drop of 4.4%, and the Nasdaq composite was down 5.6%.
Compared to their values when Donald Trump was inaugurated, the three markets were down around 5.6%, 8.7% and 14.4%, respectively, according to LSEG.
Worst one-day losses since COVID
As Wall Street trading ended at 9pm in the UK, two indexes had suffered their worst one-day losses since the COVID-19 pandemic.
The S&P 500 fell 4.85%, the Nasdaq dropped 6%, and the Dow Jones fell 4%.
It marks Nasdaq’s biggest daily percentage drop since March 2020 at the start of COVID, and the largest drop for the Dow Jones since June 2020.
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The latest numbers on tariffs
‘Trust in President Trump’
White House press secretary Karoline Leavitt told CNN earlier in the day that Mr Trump was “doubling down on his proven economic formula from his first term”.
“To anyone on Wall Street this morning, I would say trust in President Trump,” she told the broadcaster, adding: “This is indeed a national emergency… and it’s about time we have a president who actually does something about it.”
Later, the US president told reporters as he left the White House that “I think it’s going very well,” adding: “The markets are going to boom, the stock is going to boom, the country is going to boom.”
He later said on Air Force One that the UK is “happy” with its tariff – the lowest possible levy of 10% – and added he would be open to negotiations if other countries “offer something phenomenal”.
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How is the world reacting to Trump’s tariffs?
Economist warns of ‘spiral of doom’
The turbulence in the markets from Mr Trump’s tariffs “just left everybody in shock”, Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions in Boston, told Reuters.
He added that the economy could go into recession as a result, saying that “a lot of the pain, will probably most acutely be felt in the US and that certainly would weigh on broader global growth as well”.
Meanwhile, chief investment officer at St James’s Place Justin Onuekwusi said that international retaliation is likely, even as “it’s clear countries will think about how to retaliate in a politically astute way”.
He warned: “Significant retaliation could lead to a tariff ‘spiral of doom’ that could be the growth shock that drags us into recession.”
Read more:
Do Trump’s ‘Liberation Day’ tariff numbers add up?
Tariffs about something more than economics: power
It comes as the UK government published a long list of US products that could be subject to reciprocal tariffs – including golf clubs and golf balls.
Running to more than 400 pages, the list is part of a four-week-long consultation with British businesses and suggests whiskey, jeans, livestock, and chemical components.
Meanwhile, Prime Minister Sir Keir Starmer said on Thursday that the US president had launched a “new era” for global trade and that the UK will respond with “cool and calm heads”.
It also comes as Canadian Prime Minister Mark Carney announced a 25% tariff on all American-imported vehicles that are not compliant with the US-Mexico-Canada trade deal.
He added: “The 80-year period when the United States embraced the mantle of global economic leadership, when it forged alliances rooted in trust and mutual respect and championed the free and open exchange of goods and services, is over. This is a tragedy.”
Tanking stock markets, collapsing world orders, devastating trade wars; economists with their hair ablaze are scrambling to keep up.
But as we try to make sense of Donald Trumps’s tariff tsunami, economic theory only goes so far. In the end this surely is about something more primal.
Power.
Understanding that may be crucial to how the world responds.
Yes, economics helps explain the impact. The world’s economy has after all shifted on its axis, the way it’s been run for decades turned on its head.
Instead of driving world trade, America is creating a trade war. We will all feel the impact.
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PM will ‘fight’ for deal with US
Donald Trump says he is settling scores, righting wrongs. America has been raped, looted and pillaged by the world trading system.
But don’t be distracted by the hyperbole – and if you think this is about economics alone, you may be missing the point.
Above all, tariffs give Donald Trump power. They strike fear into allies and enemies, from governments to corporations.
This is a president who runs his presidency like a medieval emperor or mafia don.
It is one reason why since his election we have seen what one statesman called a conga line of sycophants make their way to the White House, from world leaders to titans of industry.
The conga line will grow longer as they now redouble their efforts hoping to special treatment from Trump’s tariffs. Sir Keir Starmer among them.
President Trump’s using similar tactics at home, deploying presidential power to extract concessions and deter dissent in corporate America, academia and the US media. Those who offer favours are spared punishment.
His critics say he seeks a form power for the executive or presidential branch of government that the founding fathers deliberately sought to prevent.
Whether or not that is true, the same playbook of divide and rule through intimidation can now be applied internationally. Thanks to tariffs
Each country will seek exceptions but on Trump’s terms. Those who retaliate may meet escalation.
This is the unforgiving calculus for governments including our own plotting their next moves.
The temptation will be to give Trump whatever he wants to spare their economies, but there is a jeopardy that compounds the longer this goes on.
Read more:
Do Trump’s numbers on tariffs really add up?
Trump hits island home only to penguins with 10% tariffs
Could America’s traditional allies turn to China? Pic: AP
Malcolm Turnbull, the former Australian prime minister who coined the conga line comparison, put it this way: “Pretty much all the international leaders I have seen that have sucked up to Trump have been run over. The reality is if you suck up to bullies, whether it’s global affairs or in the playground, you just get more bullying.”
Trading partners may be able to mitigate the impact of these tariffs through negotiation, but that may only encourage this unorthodox president to demand ever more?
Ultimately the world will need a more reliable superpower than that.
In the hands of such a president, America cannot be counted on.
When it comes to security, stability and prosperity, allies will need to fend for themselves.
And they will need new friends. If Washington can’t be relied on, Beijing beckons.
America First will, more and more, mean America on its own.
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