Direct lines of communication between American and Chinese military forces are to be reopened for the first time in more than a year, Joe Biden has announced.
Speaking after a meeting with China’s premier Xi Jinping in California, the US president said the restoration of military-to-military communications would help to prevent accidents which could spiral into wider conflicts.
Beijing formally suspended direct military contact with the US in April 2022 in the wake of then-House Speaker Nancy Pelosi’s visit to the island of Taiwan– which China views as a breakaway province.
The move to restart them was one of three agreements President Biden presented to the media following face-to-face conversations with President Xi on Wednesday – their first meeting in a year.
Mr Biden said the pair had agreed on a deal to curb the production of fentanyl – a drug which has led to a huge spike in deaths in US cities – and on the need to discuss the potential risks of artificial intelligence (AI).
Image: President Joe Biden speaks during a news conference after his meeting with China’s President Xi Jinping. Pic: AP
He said they had also exchanged views on a number of world issues, including the Israel-Hamas conflict and Russia’s invasion of Ukraine, as well as American concerns about China’s ruling communist party – among them allegations of human rights abuses and Beijing’s expansion of maritime operations in the South China Sea.
However, he said he remained committed to the US’s long-standing “One China” policy – the bedrock of Washington-Beijing relations – in which the US maintains formal ties with China and only informal ones with Taiwan.
In his own speech, made to American executives in San Francisco, Mr Xi mirrored his counterpart’s amiable tone, saying China was ready to be a friend and partner to the US.
However, in a veiled threat, he warned Washington not to bet against China, and to stay clear of its internal affairs.
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Image: Xi Jinping speaks at the “Senior Chinese Leader Event” held by the National Committee on US-China Relations in San Francisco
Mr Biden said both he and Mr Xi had agreed to open high-level communications.
“He and I agreed that each one of us can pick up the phone, call directly and we’ll be heard immediately,” he told reporters after the meeting.
When asked by a reporter at the press conference about whether he “trusted” the Chinese president, Mr Biden replied: “Do I trust [him]?
“Trust but verify, as the saying goes.
“We are in a competitive relationship – China and the US – but my responsibility is to make this rational and manageable so it doesn’t result in conflict.”
Analysis: An uneasy union one misstep from disaster
The Filoli House and Garden on the edge of California’s Silicon Valley is normally a luxury venue for weddings. But on Wednesday it was an attempt to avoid a full-blown divorce between two world powers taking centre stage.
President Biden waited at the pillared entrance to greet his guest, flanked on one side by the Stars and Stripes and on the other, the Five-star Red Flag. President Xi pulled up in a black bulletproof sedan. There was the hint of a smile from President Biden and a handshake for the man he calls a dictator.
The White House had been keeping expectations for the meeting limited, stating that this summit was about reopening channels of communication and preventing the relationship spiralling into conflict.
“I think it’s paramount that you and I understand each other clearly, leader to leader,” President Biden said across the boardroom table. “We have to ensure that competition does not veer into conflict.” President Xi suggested he, too, wanted stability. “This planet is big enough for the two countries to succeed,” he said.
Over the course of four hours – including a break for a lunch of herbed ricotta ravioli and artichoke chips – the leaders thrashed out a whole host of issues.
On many subjects there is little consensus – from wars in Ukraine and Gaza, to artificial intelligence.
There were some agreements made, on military-to-military communications and efforts to curb the production of fentanyl, the drug which kills more 18-49 year olds in American than anything else.
After talks had concluded, Presidents Biden and Xi walked around the grand grounds of Filoli House, step in step. The pair discussed their respective wives and what it is like to live in the vice president’s residence (Biden) and Shanghai (Xi).
There was even a thumbs up to photographers from President Biden and a promise that the leaders would keep talking over the phone. But with so many major issues unresolved, and tension still apparent, there is a sense that this uneasy union is one misstep from tumbling into disaster.
The US president had earlier welcomed the Chinese leader at the Filoli estate, a country house and gardens about 30 miles (48 km) south of San Francisco, ahead of a summit of the Asia-Pacific Economic Cooperation (APEC) forum.
The meeting came amid increasingly strained tensions between the two global powers.
Mr Biden had earlier billed the meeting as a chance for Washington and Beijing to get back “on a normal course” again, and that the two countries had to make sure that the rivalry between them did “not veer into conflict”.
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Since they last met in November 2022, fraught relations have been further strained by the US downing of a Chinese ‘spy’ balloon that flew over America and by differences on the self-ruled island of Taiwan, as well as China’s hacking of a Biden official’s emails.
Mr Xi said a lot had happened since their last meeting, telling the media: “The world has emerged from the COVID pandemic, but is still under its tremendous impacts. The global economy is recovering, but its momentum remains sluggish.”
He said prior to the meeting that he wanted assurances from Mr Biden that the US would not support Taiwan independence, start a new Cold War, or suppress China’s economic growth.
Mr Xi said he was also keen to show America that China is still a good place to invest.
After the meeting, Mr Biden wrote on X, formerly Twitter: “I value the conversation I had today with President Xi because I think it’s paramount that we understand each other clearly, leader to leader.
“There are critical global challenges that demand our joint leadership. And today, we made real progress.”
The White House later said in a readout of their conversation that the talks had been “candid and constructive” and that they had “made progress on a number of key issues”.
“The two leaders welcomed the resumption of high-level military-to-military communication, as well as the US-China Defence Policy Coordination Talks and the US-China Military Maritime Consultative Agreement meetings,” the White House said.
“Both sides are also resuming telephone conversations between theatre commanders.”
Global financial markets gave a clear vote of no-confidence in President Trump’s economic policy.
The damage it will do is obvious: costs for companies will rise, hitting their earnings.
The consequences will ripple throughout the global economy, with economists now raising their expectations for a recession, not only in the US, but across the world.
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.
All three of the US’s major markets opened to sharp losses on Thursday morning.
Image: 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.
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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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5:07
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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3:27
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.”
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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0:58
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.
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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.
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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.
Image: 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.