US and China trade talks will take place in Osaka, Japan, when the G20 talks start this week. The US and China trade talks have been dominated by the trade teams, the A Team of winning. These teams are dominated by conservative minds that need, not want but need, to get things done for their people. However, despite the CCP, the Communist Party, being a driving force on the China side, a trusted and well-liked – and very powerful – President Xi can sure get things done after a face to face meeting with President Trump. Note that Trump will be able to move President Xi, but in the end, the blocks to trade are structural and it will take many months and likely years to get a trade deal done. Right now, financial markets are welcoming a “bilateral” meeting between these two leaders. Trump will likely do the follow – this is our view.
1. China will send messages that it will talk but at the same time will reject any decision that brings on more of the “Hundred Years of Humiliation” a term used to describe how China was humiliated by the Western Powers.
2. China wants to damage Trump and his ability to be re-elected in 2020. China will be happy to work with anyone who help them shut down Trump.
3. The US knows that it has the best hand of cards as China must have access to global markets, global energy and global food – China has global needs, and local power (only local reach). The US has local needs and global power (reach). Explained briefly, the US relies on itself for energy and food and its domestic market (7% of GDP is trade with others). China has to go abroad to get energy and food as it does not produce enough and its economy relies on selling products overseas (30% of its economy is from overseas sales). China relies on the planet to live, the US relies on itself to live. This will not change for another 20 years.