Donald Trump, Xi Jinping. President Donald Trump and Chinese President Xi Jinping shake hands during a joint statement to members of the media Great Hall of the People in Beijing, China. The U.S. is announcing that it will impose a 25 percent tariff on $50 billion worth of Chinese goods containing "industrially significant technology." The White House said, that the tariff will cover goods related to the "Made in China 2025" program. The full list of imports that will be covered will be announced by June 15Trade, Beijing, China - 09 Nov 2017

GENEVA — The world’s international business and trade communities are nervously waiting to see if the face-to-face meeting between President Donald Trump and Xi Jinping on the sidelines of the G20 Summit in Buenos Aires delivers a deal that pulls them back from the brink of a costly trade war.

After U.S.-China trade tensions derailed the recent 2018 Asia-Pacific Economic Cooperation summit and Chinese and U.S. trade envoys exchanged more accusations at a World Trade Organization forum on Nov. 21, international diplomats are concerned that failure by Trump and Xi to narrow their differences — or, at a minimum, agree on a political roadmap for negotiations to defuse the crisis — could cause the world economy to see more turbulence and instability in 2019.

“The question is whether the U.S. feels the time has come to sit around the table, or whether they want to prolong the fight. At least one part of the U.S. administration is saying it is better to sit down and start a conversation. I don’t think this would end in Buenos Aires, the question is whether it starts,” a senior international trade official told WWD.

“In the short term, we will continue to see tensions and the question is whether they find a path to manage these tensions, or not. I don’t think they’re going to resolve them because the way this is framed on the U.S. side and the way this is framed on the Chinese side is not to find a quick solution, and then let go. The U.S. is asking for systemic change, while China is talking of long-term reforms,” the official added.

Meanwhile, Roberto Azevedo, the WTO director-general, warned in a statement last week that “Further escalation remains a real threat. If we continue along the current course, the economic risks will increase, with potential effects for growth, jobs and consumer prices around the world. The WTO is doing all it can to support efforts to de-escalate the situation, but finding solutions will require political will and it will require leadership from the G20.”

The somber remarks by Azevedo, who will attend the G20 summit, were made after a WTO report found that G20 economies between mid-May and mid-October had imposed 40 trade-restrictive measures, including tariff increases, import bans and export duties, on more than $480 billion worth of trade.

Similarly, last week, the Organization for Economic Cooperation and Development revised downward its outlook for the world economy and now expects growth to expand in 2019 by 3.5 percent, compared with 3.7 percent forecast in May. “Trade growth and investment have been slackening on the back of tariff hikes,” it said.

On Wednesday, the chief of the International Monetary Fund, Christine Lagarde, also urged G20 leaders not to resort to protectionist measures. “We know that rising trade barriers are ultimately self-defeating for all involved. Thus, it is imperative that all countries steer clear of new trade barriers, while reversing recent tariffs. We have a unique opportunity to improve the global trade system. IMF research suggests that liberalizing trade in services could add about 0.5 percent, or $350 billion, to G20 GDP in the long run,” she said.

Harley Seyedin, president of the American Chamber of Commerce in South China, this month told a business conference in Guangzhou the message from American companies is the best way to resolve differences with China “is at the negotiating table…and we should encourage our leaders to go back to the negotiating table because we need China and China needs the U.S.”

A European apparel industry expert told WWD that if China-U.S. trade relations deteriorate further in the event of more punitive tariffs, “China would not wait and would try to find another market for their products. Partially that would be in the European Union, and partially in markets around the world, which means globally our exporters would face tougher times outside. The trade diversion to the EU could also increase the risks of prices falling.”

China and the U.S. also locked horns last week at a session of the WTO’s Dispute Settlement Body, which established 12 dispute panels to examine complaints (five by the U.S. and seven by trading partners including by China and the EU) related to the slapping of tit-for-tat punitive tariffs set in motion by the Trump administration’s tough stance on trade.

Of special interest was the establishment of a panel to examine a complaint by the U.S. that certain Chinese measures related to intellectual property rights disadvantage foreign companies for the benefit of Chinese industry. The U.S. delegation claimed these IPR policies have resulted in an estimated $50 billion in annual harm to the U.S. alone.
The European Union and Japan backed the U.S.’ concerns on IPRs.

The Chinese delegation, however, countered, “The U.S. accusations are founded on the deliberate misrepresentations of Chinese law and practice,” and noted claims of “forced technology transfer” allegations by the U.S. “are meritless.”

Daniel Crosby, a partner in the international trade law practice of King and Spalding, and manager of its Geneva office, told WWD, however, “No one had ever foreseen a country will decide to continue taking advantage of the open-world market, but not implement its [WTO] commitments to allow everybody else to do business in its country. It’s just unprecedented, and that’s what’s happening.”

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