Bloomberg Businessweek - USA (2019-06-24)

◼ POLITICS Bloomberg Businessweek June 24, 2019

43

THEBOTTOMLINE Trumpsayshe’slookingforwardtomeeting

withXi,butthat’snoguaranteea conversationwillproduceresults

thatwillcalmglobalinvestors.

● AsColombiastrugglestocurtailcocaineproduction, Trump

threatenstocutoffaid

A Casualty of the

War on Drugs

Tara,a bomb-sniffingdogwiththeColombiananti-

narcoticspolice,failedtodetectthelandmine,

andtheexplosionflungofficerJoseCarvajalhigh

intotheair.Whenhetriedtostandup,Carvajal

foundthathislegswouldnolongerobey.“When

I lookeddown,myrightfootwasn’tthere,”he

mightyielda pauseinanynewU.S.tariffsanda
resumptionofthetalksthatbrokedowninMay.
Whilesucha trucewouldextendtheuncertainty
ofthepastyear,it wouldatleastofferthehopeof
short-termpeace.
Theworst-casescenariowouldturnthesimmer-
ingtradetensionsintoa newcoldwar.If themeet-
ingis derailedbeforeit beginsorif thetwoleaders
merelyfailtoreacha firmagreement,theworld
willhavetoconfrontanescalatingconflictbetween
thetwolargesteconomies,withallthedamagethat
wouldentailintumblingfinancialmarketsanda
furtherslowingofglobalgrowth.
Thelatterpossibilitycannotbedismissed.The
twoleadershavestrikinglydifferentapproachesto
negotiations,whichhavecausedthemproblemsin
thepast.Trump,withhisfreewheelingstyle,likes
tokeeppeopleacrossthenegotiatingtableoffbal-
ance.Xiisseenasfarmorecautious,andthose
aroundhimhaveresistedtheideaofputtinghim
intoa meetingwheretheoutcomehasn’tbeen
carefullychoreographed.
WhatsomeinChinaseeasTrump’sbullying
approachmayalsomakeit harderforXitobendto
U.S.demandsforreformsoneverythingfromindus-
trialsubsidiestointellectual-propertyenforcement.
By“claimingpubliclythathehasXiovera barrel,”
ashe’sdonerepeatedly,TrumphasembarrassedXi
whenheshouldbecourtinghim,saysRobertDaly,a
ChinaexpertandformerAmericandiplomatwho’s
nowattheWilsonCenterinWashington.Themore
theChineseleaderis boxedin,thelesslikelyheis
tomakea dealthatmightbeviewedasa surrender,
analystsinBeijingargue.
Matthew Goodman, who once prepared
PresidentBarackObamaforG-7andG-20summits
froma seatontheNationalSecurityCouncil,says
it’sstilltooearlytocalla newcoldwar.Evenas
Trumphas dialedupthe heat onChina—and
proxiessuchastechgiantHuaweiTechnologies
Co.—youcanstillmakethecase,Goodmansays,
thatthegoalisa fairerformofeconomicinter-
dependence,asit’sbeenforthepast 40 years. At
the same time, he says, one might wonder: “Are we
now on a different path?”
Clete Willems, who until April served a simi-
lar role for Trump, is optimistic that the U.S. and
China will close a deal by the end of the year. It’s
in both countries’ interest, and Trump’s recent
rhetorical escalation and tariff threats are more
about pushing for an agreement than a decou-
pling, he says. “As long as the administration stays
focused on China and avoids inadvertently under-
mining support for its China strategy by raising
tariffs on other countries, I think the U.S. show of

strengthhelpsincentivizeChinatomakea deal.”

A bigcluetotheU.S.approachcouldcomein

a June24 speech by Vice President Mike Pence,

one of the administration’s most unforgiving pub-

lic voices on China. Should Pence deliver a repeat

of the hawkish speech he gave last year at the con-

servative Hudson Institute in Washington, in which

he presented a vision of all-encompassing conflict

with China, it may be a signal that Trump has no

interest in compromise.

Meanwhile, though he’s arguably China’s most

powerful leader since Mao Zedong, Xi is fac-

ing economic and political troubles at home that

limit his room to maneuver. As the Chinese econ-

omy appears to be weakening, a sweeping trade

war would mean more pain. The mass protests

in Hong Kong that forced the local government to

back away from passing a new extradition law have

highlighted concerns over Xi’s authoritarian ways.

So has the internment of Muslim minorities in the

far western province of Xinjiang.

Of course, it’s not clear Trump’s hand is as

strong as he believes, either. His tariffs are increas-

ingly unpopular, and damage from them is begin-

ning to show up in economic data. He and Xi each

face opposing pressures at home: to stand strong

and to resolve the fight before the economic

destruction mounts. A truce may emerge from

Osaka. Even if it does, though, turning it into a lon-

ger peace is likely to be difficult. �Shawn Donnan

and Peter Martin

“I think the

U.S. show of

strength helps

incentivize

China to make

a deal”