Trump-Xi countdown
With help from Anita Kumar, Kristin Huang and Catherine Wong
This newsletter is a joint production of POLITICO and the South China Morning Post.
QUICK FIX
— A long-awaited meeting on Saturday between President Donald Trump and Chinese President Xi Jinping could renew a drive to reach a negotiated end to the trade war.
— The Europeans are waging an increasingly lonely campaign to keep the battle against climate change at the heart of the G-20 agenda as Washington pressures other countries to backtrack on environmental commitments.
— Japanese Prime Minister Shinzo Abe expressed “grave concern” about the world trade situation and called for renewed efforts to reform the WTO.
WE’RE HALFWAY DONE IN OSAKA, JAPAN! Welcome back to your daily G-20 briefing, with your joint team from POLITICO Europe, POLITICO and the South China Morning Post.
Faultlines clear: The big picture emerging in Osaka is severe fragmentation. A decade ago, tight coordination in the G-20 stopped the world economy cracking up in the financial crisis, but this summit is now fast becoming the stage on which geopolitical and commercial tensions boil over, and nobody seems able to pick up the pieces. Trump is pushing back against the idea that a tariff ceasefire with China is in the bag, Japan is expressing grave concern over global trade spats, and Russia’s President Vladimir Putin even used a Financial Times interview to sound the death knell for liberalism.
Different approaches: While the Europeans fumed over Putin’s comments, Trump has been exchanging laughs with the Russian leader. After a reporter asked Trump whether he would talk to Putin about election interference, Trump responded: “Yes, of course I will.''
Then he turned to Putin, smiling and pointing his finger in the Russian president's direction, saying: "Don't meddle in the election, president… Don't meddle in the election." Putin, after hearing the translation, laughed.
Our colleague David Herszenhorn has more.
DRIVING THE DAY
DECISION DAY FOR XI AND TRUMP: The most highly-anticipated meeting of the G-20 summit feels like a summer rerun. Almost seven months after they last met in Buenos Aires, the world is again waiting to see whether Trump and Xi will agree to a temporary truce in their trade war.
Trump told reporters on Friday that he had not already promised China to hold off on more tariffs for six months. But he appeared optimistic about the meeting. “It’ll be a very exciting day I’m sure,” Trump said. “It’s going to come out hopefully well for both countries.” U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He met Friday evening to set the stage for the Xi-Trump meeting.
Mixed signals: At the family photo shoot on Friday, Xi walked directly to Trump and shook his hand before going to his own place. He didn’t talk to anyone else. The two leaders spoke on the phone on June 18 for the first time since December 29. That may sound encouraging, but China has also been carefully managing public expectations on the outcome of the Trump-Xi meeting since a deal to end the trade war was not reached at their last meeting in December. The vague phrasing of Chinese government and official press statements about the meeting is intended to deliver the message that China pins low hope on Saturday’s meeting to protect the images of Xi and the ruling Communist Party if the meeting is deemed a failure.
XI SEEKS SUPPORT FROM PUTIN, MODI AGAINST U.S.: Following a meeting with Putin and India’s Narendra Modi, Xi said China, Russia and India should work together to fight protectionism and protect the “fundamental and long-term interests” they share. Whoever could he be referring to there? Xi also called for Putin’s and Modi’s support in the growing tech war with the U.S., urging co-operation in emerging market 5G deployment but he dodged criticism in India that China is protecting Pakistan, saying the three nations should combat terrorism together.
‘RED LINE’ ON CLIMATE: The EU is facing an uphill battle to maintain a united front at the G-20 on climate change. Under pressure from Washington, several countries including Saudi Arabia, Brazil, Australia and Turkey have signaled they want to backtrack on commitments made in the years before, three senior officials told POLITICO.
Such a backtrack would be “unacceptable” to the EU, one said. The Commission plus France, Germany, Spain, Italy as the countries represented in Osaka, met Friday morning to form a joint position and decided to endorse French President Emmanuel Macron’s stance that any weakening of the language would be a ‘red line,’ the three officials said.
Magic words: The communiqué must read that the Paris agreement is “irreversible” and that the G-20 countries “fully commit” to implementing it, officials explained.
U.S. attack: At the G-20s in Hamburg and Buenos Aires, Washington secured a carve-out from those magic words. But as a result of U.S. pressure, there is now a risk that other countries could join the U.S. camp.
Deadlock: The EU is trying to counter the U.S. pressure. Macron suggested the EU would not ratify the trade deal with Brazil if President Jair Bolsonaro abandoned the Paris agreement.But as of Friday afternoon, there was a deadlock. The final communiqué was at risk, two officials from different EU countries told us. As officials headed into their nightly round of negotiations one said that the chapter on climate change would have to be left for the heads of state to decide.
ABE EXPRESSES “GRAVE CONCERN” OVER GLOBAL TRADE SITUATION: Abe, as chair of the G-20 summit, urged leaders to redouble efforts to reform the World Trade Organization, which has been under increased strain from Trump’s combative approach to trade policy.
“I harbor grave concern regarding the current situation on global trade,” Abe said, speaking through a translator. “Tit-for-tat of trade restrictive measures are to benefit no one. Whatever the trade measures be, they must be consistent with WTO agreement.”
That seemed to be a dig at Trump, who has dusted off rarely-used U.S. trade remedy laws to impose tariffs on steel and aluminum imports from around the world and to slap a 25 percent duty on $250 billion worth of Chinese goods.
TRUMP’S LONELY QUEST ON IRAN: Trump spent Friday in Osaka looking to build support an Iran nuclear deal 2.0. But he once again found himself alone. (It’s not an unfamiliar place for him.)
Not only do other countries still support a 2015 nuclear pact, they’re skeptical Trump can strike a better agreement within the time constraints of his fast-approaching reelection campaign, especially after Iran recently proclaimed the end of diplomacy with the U.S. Macron accused Trump of lacking "coherence" by cozying up to North Korea while talking tough on Iran.
THE OLD EMPIRE STRIKES BACK: The Europeans, who are thoroughly fed up with being upstaged by the Trump-Xi show, might just have a trick up their sleeve. The messaging from Brussels is that the EU, the world’s biggest trade bloc, could well strike a political agreement with the Mercosur grouping of Brazil, Argentina, Uruguay and Paraguay on Friday. Or at least it will be clear whether they are able to or not.
If all goes according to plan, there could then be a big party in Osaka. In terms of tariff reductions, this would be the EU’s biggest deal, and you can be confident that the EU will not waste any time parading their liberal, free-trading agenda before Trump.
XI OFFERS OLIVE BRANCHES YET AGAIN: No big international meeting is complete without vague Chinese pledges to open its market. These are usually taken with a pinch of salt, and big EU investors are currently eyeing the country’s massive tenders for 5G equipment as the real litmus test of whether the country is serious about opening up. When meeting German Chancellor Angela Merkel, Xi also said China's pledges to reform and opening up are not "empty promises."
NO XI-ABE BROMANCE YET: At the ceremony Friday morning where Abe welcomed each of the leaders, Xi and Abe made it look like they were each meeting the friend they least wanted to see. The body language was tense, and Abe sighed when Xi left the stage. In contrast, the waving, smiling Trump looked like he was having the time of his life.
Chalk and cheese: At the working lunch, Xi sat next to Canadian Prime Minister Justin Trudeau and didn’t acknowledge his presence while the cameras were rolling, underscoring the growing troubles over detained citizens.
WHAT WE'RE READING
— India presents U.S. with a choice between geopolitics and trade, The Economist reports.
— Trump sees “very big” trade deals with Japan, India, the Wall Street Journal reports.
— China boosts studies of U.S. on criticism misreading of Trump triggered trade war.
— Putin tells the Financial Times that liberalism has become obsolete.
— Trump praises Japanese auto investment in U.S. as tariff threat looms, POLITICO reports.
ON THE CALENDAR
SATURDAY
8:15 a.m. — Trump has working breakfast with Saudi Crown Prince Mohammed bin Salman.
11:30 a.m. — Trump meets with Xi.
1 p.m. — Trump meets with Turkish President Recep TayyipErdogan.
THAT'S ALL FOR THE G-20 REPORT! See you again soon! In the meantime, drop the team a line: dpalmer@politico.com; akumar@politico.com; jhanke@politico.eu; dherszenhorn@politico.eu; wendy.wu@scmp.com; kristin.huang@scmp.com; catherine.wong@scmp.com.
Follow us@POLITICOPro and @Morning_Trade.
