Photo: VCG

When President Xi Jinping and US President Donald Trump meet Saturday on the sidelines of the ongoing G20 summit in Japan, the world will be watching closely. 

The stakes couldn't be any higher as the two leaders make another attempt to resurrect the deadlocked trade negotiations and avert a further escalation of the costly trade war between the world's two biggest economies.

Xi and Trump are scheduled to meet around noon Saturday in Osaka to discuss what Chinese officials call "fundamental issues" related to the bilateral relationship. 

But for global financial markets, the focus will be on whether they could reach a truce that could at least defuse the escalating tensions to make room for talks as they did at a similar meeting in Argentina in December 2018.

For many in China, although there is hope that the meeting could help defuse tensions, the prospect of a truce, let alone a trade deal, is bleak because the nature of the bitter trade dispute has changed, since the two leaders met half a year ago.

Following several tumultuous weeks, distrust between the two countries, particularly China's distrust of the US administration, has only deepened and a divide on not just trade but a host of other issues has only widened. 

After threatening more tariffs on Chinese goods two days ago, Trump on Friday struck a vague but relatively positive tone over the upcoming meeting, saying that he was expecting a "productive meeting," but added, "who knows?"

Geng Shuang, a spokesperson for the Chinese Foreign Ministry, said the working teams from both sides are in close contact on preparation for the meeting. He also urged the US side to meet China halfway and jointly work toward "positive results" from the meeting.

Far apart 

The huge difference between the two sides was evident in remarks of US officials a day before the scheduled meeting.

At the meeting, China is expected to keep its bottom lines before trade talks could resume: all US tariffs must be removed; a US request for Chinese purchases must be reasonable; the potential agreement must respect China's dignity and sovereignty and be a balanced one. China will also likely demand the US to stop targeting Chinese tech firms such as Huawei and those involved in supercomputers, said Chinese experts close to the government.

"These are reasonable requests that China has already laid out even before the US called for the meeting," said Li Yong, deputy chair of the Expert Committee of the China Association of International Trade, which is affiliated to the Chinese Commerce Ministry. "These are not just requests from China but requests of US companies and industries as well," he added.

But a day before the meeting, US officials continued with their bullying and maximum pressure tactics, which they have always relied on when it comes to addressing any issue they have with another country. 

In an interview with Fox News on Thursday US time, Larry Kudlow, director of the White House National Economic Council, said the US did not agree to any preconditions and hinted the US would move ahead with additional tariffs on $300 billion in Chinese goods. 

US Trade Representative Robert Lighthizer also told the Chinese side that a potential trade agreement cannot be "balanced," CNBC reported, citing anonymous sources, suggesting that the deal would have to be in favor of the US.

"The fox may turn gray, but never kind," said Mei Xinyu, a research fellow at the Chinese Academy of International Trade and Economic Cooperation. "Wielding the stick before negotiations is a typical trick of Trump. The regrettable thing is that after all these while, they still haven't realized that it will not work with China."  

China will not bow to pressure and if the US goes ahead with additional tariffs, China may retaliate by deploying tools, such as further raising tariffs on US goods and restricting rare earths exports to the US, experts said. China could also target specific US companies that hurt Chinese interests by putting them on the unreliable entity list.

Winning hands

After a year of fighting, Chinese officials are more confident and experienced in dealing with the US administration and believe that time and public support are on the Chinese side, experts close to Chinese officials said.

Despite the US tariffs and internal cyclical downward pressure, the Chinese economy remains solid, with GDP growth, consumer inflation and industrial profits all showing stable signs. China has also taken stimulus measures to further boost its economy.

On the other hand, the US economy, which has recorded one of the longest expansions in history, is starting to show ominous signs, with some projecting that it could fall into a recession as soon as the end of this year or early next year.

While Chinese citizens and businesses have shown overwhelming support for the government to beat back what they believe is the US' ill-intentioned goal to contain China's rise, more and more US businesses and industries are lining up to oppose Trump's trade policies. 

US protectionist policies and bullying tactics, which are not only directed at China but many other countries as well, including some of the US' closest allies, will also not bode well with world leaders gathered at the G20 summit, where multilateralism and economic globalization is the main theme.

"Basically, there is no support for Trump both domestically and globally other than his circle of extremist advisers [like Secretary of State Mike Pompeo and Lighthizer], whereas China is making more friends," Mei said.

Prior to the start of the G20 summit, Xi met with Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in on Thursday night and agreed to strengthen bilateral ties and preserve global free trade.  Trump lashed out at almost all major economies, including those in Europe, India, Vietnam and even Japan, accusing them of taking advantage of the US in trade and security.