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.
Donald Trump has confirmed he will meet Sir Keir Starmer “very soon” after the prime minister “asked to come” to the US.
Mr Trump discussed details of his phone call with Sir Keir while taking questions from the media in the White House’s Oval Office on Friday.
“He asked for a meeting, and I agreed to the meeting,” the US president told reporters.
“We’re going to have a friendly meeting – very good.”
Donald Trump and Keir Starmer will meet ‘very soon’, the president indicated. Pic: Reuters
He added: “We have a lot of good things going on. But he asked to come and see me and I just accepted his asking.”
The date for their meeting is unknown. When pressed, Mr Trump said it will happen “very soon”.
“I think he wants to come next week… or the week after,” he added.
When asked by a reporter what they will discuss, Mr Trump said: “I don’t know. It was his request, not mine.”
“I met him twice already, we get along very well, he’s a very nice guy,” the president said of Sir Keir.
Sir Keir Starmer meets with the US Special Envoy to the UK, Mark Burnett and others. Pic: Instagram/USA in UK
The call between the president and prime minister is understood to have happened on Thursday during Sir Keir’s meeting with Mark Burnett, Washington’s special envoy to the UK.
The prime minister and Mr Burnett discussed the UK-US ‘special relationship’, and potential “further collaboration” on trade, technology, and culture.
An Instagram story for the US Embassy in London said that, during the dinner, President Trump called Mr Burnett, who “passed the phone to the PM”.
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A Downing Street spokeswoman said: “The prime minister was pleased to host President Trump’s special envoy to the United Kingdom, Mark Burnett, at Downing Street last night, during which he took a call from President Trump and discussed his forthcoming visit to the US.”
She added: “Mr Burnett and the prime minister agreed on the unique and special nature of the UK-US relationship, the strength of our alliance, and the warmth of the connection between the two countries.”
Sir Keir’s upcoming trip comes as the United Kingdom faces the potential threat of trade tariffs set by the US.
Mr Trump announced plans to impose “reciprocal tariffs” on all countries that impose extra costs on goods from the US, including countries which charge VAT on goods, like the UK.
US
Donald Trump triggers prospect of global trade war over ‘reciprocal’ tariff plan – increasing risk of tensions and inflation
The US president has promised to target countries which charge tax on US imports by matching them with a reciprocal tariff.
Donald Trump has ordered his team to start calculating duties by early April – increasing fears of a global trade war that could also accelerate US inflation.
“On trade, I have decided for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them. No more, no less,” he posted on Truth Social.
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What is America’s trade position?
It is set to spark negotiations with dozens of countries aimed at lowering their tariffs and trade barriers. The US wants to shrink its goods trade deficit which topped $1.2trn (£954bn) last year.
A White House official said that countries with large US trade surpluses could be targeted first. The top five are China, Mexico, Vietnam, Ireland and Germany, according to the US Census Bureau.
Trump’s total trade war
Taken at face value Donald Trump’s embrace of reciprocal tariffs is a declaration of total trade war.
It would amount to perhaps the single biggest peacetime shock to global commerce.
In promising to levy import taxes on any nation that imposes tariffs or VAT on US exports, he is following through on a campaign promise.
The aim is to address a near trillion dollar trade deficit – the difference between the value of America’s exports and its imports – that he believes amounts to a tax on American jobs.
In response, he wants to deploy tariffs to simultaneously ease the US deficit and – in theory – price out imports in favour of domestic production.
His primary targets appear to be the major trading partners with whom the trading deficit is greatest.
It is a blow to the emerging view in Whitehall that Britain might wriggle through the chaos relatively unscathed.
Read more from Paul here.
UK government minister Pat McFadden told Sky News’ Politics Hub with Sophy Ridge that Britain will take a “wait and see” approach when it comes to the tariffs. He refused to say if the government would retaliate.
Trump latest: New tariffs signal ‘total trade war’
The UK could be hit with tariffs as high as 24% if Mr Trump follows through on his threats to treat VAT as a tariff, according to Paul Ashworth, chief North America economist at Capital Economics.
Although some estimates are lower, he thinks Britain would be the fourth hardest hit, following India (29%), Brazil (28%) and the EU (25%).
This is based on VAT rates combined with existing tariffs, but the Trump administration also intends to take into account regulations, government subsidies, digital services taxation policies and exchange rate policies.
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“Most people would consider VAT to be a non-discriminatory tax since it is also applied to domestically-produced goods making a level playing field,” said Mr Ashworth.
But the US still argues that VAT is a form of discriminatory tariff because America applies a much lower average sales tax at state level.
Narendra Modi and Donald Trump at the White House. Pic: AP
On Thursday, Mr Trump also held a meeting with Indian Prime Minister Narendra Modi, agreeing to join forces on artificial intelligence, semiconductors and strategic minerals.
During a news conference afterwards, Mr Trump said India has been “very strong on tariffs” and “it’s very hard to sell into India”, adding: “They’re going to be purchasing a lot of our oil and gas.”
India’s tariff rates are the highest, according to the World Trade Organisation, with a simple average 17% rate for all products compared to 3.3% for the US.
Taken at face value Donald Trump’s embrace of reciprocal tariffs is a declaration of total trade war, that would amount to perhaps the single biggest peacetime shock to global commerce.
In promising to levy import taxes on any nation that imposes tariffs or VAT on US exports, he is following through on a campaign promise to address a near trillion dollar trade deficit – the difference between the value of America’s exports and its imports – that he believes amounts to a tax on American jobs.
In response, he wants to deploy tariffs as an “external revenue service”, simultaneously easing the US deficit and, so the theory goes, pricing out imports in favour of domestic production.
Follow latest: Trump’s trading tariffs
With a promise to reestablish industries, from chip production lost to Taiwan, and car and pharmaceutical manufacturing to Europe, he is promising a country-by-country tailored assault on the status quo.
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Donald Trump unveils new tariffs for trading partners
Risk to Britain remains uncertain
His primary targets appear to be the major trading partners with whom the trading deficit is greatest.
Mexico and Canada, the European Union (whose 10% tariff on US cars is a particular irritation), as well as the ‘BRICS’ nations – Brazil, Russia, India (which imposes 9% tariffs on US imports), China and South Africa.
What it means for the UK will not be certain until the details are revealed in April, but it is a blow to the emerging view in Whitehall that Britain might wriggle through the chaos relatively unscathed.
To begin with, the US runs a trade surplus with the UK – in a quirk of statistics, the UK thinks it has a surplus too – and Brexit has placed it outside the EU bloc with the ability at least in theory to be more agile.
The UK also imposes direct tariffs on very few US goods following a deal in 2021, brokered by then trade secretary Liz Truss, that removed tariffs on denim and motorcycles bound for Britain, and cashmere and Scotch whisky heading the other way.
But we do add VAT to imports, and Mr Trump’s threat to treat the sales tax as a tariff by another name will chill British exporters.
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Donald Trump accepts his tariffs will be inflationary for the US. Pic: AP
Tariffs set to raise prices in US
Analysts have estimated tariffs could add 21% to the cost of exports, amounting to a £24bn blow to national income.
Pharmaceuticals, cars, chemicals, scientific instruments and the aerospace industry – the main components of our £182bn US export trade – will all be potentially affected.
But the pain will certainly be shared.
Tariffs are paid by the importer, not the exporter, and even Mr Trump accepts they will be inflationary.
Rising prices on Main Street could yet be the biggest brake on the president’s tariff plan.
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