He Said, Xi Said

Once again, this week, the United States and China are holding a summit meeting between the two nations’ leaders. Indications are that both procedurally and substantively it will be very much like the last one in May in Beijing. Procedurally, it looks like Xi Jinping will be on the ground in Washington for about 36 hours, about the same amount of time Trump spent in Beijing, and he is bringing a delegation of business leaders with him just as Trump did. And there will be a state dinner, just as there was in May.

Substantively, the outcome may be similar as well. As always, Trump will say it was a very successful meeting. That may or may not be true, but both countries are beset with growing economic problems and are not interested in adding a crisis in the bilateral relationship to them, which means they have every incentive not to rock the boat. The relationship over the past 20 months has been characterized by a series of provocations followed by retaliation, then counterretaliation, and finally a leaders’ meeting that produces a reset and restarts the cycle. A ceasefire of sorts was reached at the summit last October, and it has more or less held so far. It expires the week after the midterm elections, but observers expect a decision to renew it before then, probably for another year. That would be a modest but welcome outcome, although the possibility of another round of provocations and retaliations is always only one Truth Social post away.

While there is no shortage of issues that could come up, expectations for substantial results are modest. The two governments cannot or will not talk about the big things, so instead they content themselves with small things. The big things haven’t changed very much over the years. The United States wants China to end its subsidies and intellectual property theft and to change its economic model away from overcapacity and export growth to greater domestic consumption. China wants the United States to loosen its export controls on sensitive technologies and be more accommodating on Taiwan. Neither country is going to meet those demands to any significant extent, so instead, the two discuss more specific irritants, such as the U.S. tariffs and China’s restrictions on exports of rare earths and critical minerals. Both sides may make vague promises in these areas that are not likely to amount to much, and we can expect the usual commercial deals involving Boeing aircraft, minerals, and agriculture, as well as commitments to revivify the Board of Trade and Board of Investment.

A related issue will be the ongoing Section 301 investigation into overcapacity. The investigation covers 16 countries, but China is the most important because it is the most guilty. Additional U.S. tariffs on China as a result of this investigation are likely, but it appears that the United States has limited flexibility in applying them: An additional 7.5 percent would reach the cap agreed to in last year’s ceasefire. If the United States sticks to that previous agreement, it would be good news for both China and the other countries being investigated. It would be a small increase for China, and the others would rightly expect any tariffs on them to be even smaller, as China is the biggest, if not the only, offender. This decision has been put off until after the summit, but China undoubtedly will have something to say about it.           

The most eagerly awaited discussion will be on artificial intelligence. Both countries are locked in a battle for technological leadership, at the same time that concern is growing in each over the short-term economic and safety implications and the long-term existential consequences if the technology gets out of control. This is a problem that begs for an agreement on rules and guardrails, but that is not likely to be forthcoming. Instead, expect an announcement of an expanded dialogue that will kick the can on action, hopefully not before it’s too late.

Another issue will be the recently passed legislation providing for additional sanctions on Russia, including up to 100 percent tariffs on the biggest buyers of Russian oil, one of which is China. The Treasury Department recently expanded existing Russia sanctions but has been unclear about the extent to which they will apply to China. Expect similar ambiguity about the newly authorized tariffs. This is one of those issues that illustrates a divide in the administration between Trump and everybody else: While senior officials follow the president’s lead, most of them have a more skeptical view of China and would prefer a harder line. Trump persists in his fondness for personal diplomacy, apparently believing that if he cultivates good personal relations with his counterparts, they will make deals with him. This has been his approach to Vladimir Putin, Kim Jong-un, and Xi Jinping. It has not been successful with the first two and, so far, has not produced much with Xi beyond periodic ceasefires. One could argue that this is a smart strategy so long as the United States remains dependent on China for critical minerals. The administration is pursuing policies to enhance domestic and allied capabilities, as did preceding administrations, but progress takes time, and in the short term, if China were to cut off access to minerals, there would be a significant blow to the U.S. economy.

Finally, a summit would not be a summit without mention of Taiwan, which Xi is certain to bring up hoping to persuade Trump to make further statements casting doubt on the extent of U.S. support for the island. This is primarily a foreign policy issue, but an escalation of pressure on Taiwan could have serious economic consequences for the United States, particularly in its semiconductor sector.

As my CSIS colleague Scott Kennedy put it in his recent summit forecast, “This is a great power competition tempered by interdependence, a rough balance of power, and a need by both to handle challenges at home.” That means a “small” summit where the most likely outcome will be small deals and vague commitments. And, ironically, that may be the best news possible at the moment.

William A. Reinsch is a senior adviser (non-resident) and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C. He can be reached at [email protected].