Trump-Xi Summit, USTR's G20 trade ministers meeting, and EU-China Trade Updates

The Trade Guys

The hosts analyze the outcomes of the recent Trump-Xi summit, noting a tactical extension of the trade truce and reduced tariff tensions while highlighting lingering structural

Key takeaways

• President Trump and Xi extended a trade truce until January 10th, reducing tariffs on essential goods like railroads and fertilizer materials without requiring concessions.
• U.S. tariff reductions to MFN rates create an anomaly where Chinese imports may face lower duties than allies from the EU or Malaysia, inviting future complaints.

Main topics

• Trump-Xi summit outcomes and tariff truce extension
• G20 trade ministers meeting in Milwaukee

Notable quotes

"It appeared to be well-timed and a cordial visit."

Conclusion

The episode underscores how short-term diplomatic de-escalation masks deeper structural shifts

Transcript preview

Speaker 1 (0:00) I'm Scott. I'm Bill. And we're the Trade Guys. Speaker 3 (0:07) You're listening to The Trade Guys, a podcast produced by CSIS, where we talk about trade in terms that everyone can understand. I'm Alex Kisly, and I'm here with Scott Miller and Bill Reitsch, the CSIS Trade Guys. Speaker 3 (0:21) Thanks for listening to The Trade Guys. On today's episode, we break down what came out of the Trump-Xi Washington summit. Then we look at the U.S. trade representatives gathering of G20 trade ministers in Milwaukee and unpack why the EU is pressing China to limit exports of hybrid vehicles. All that and more on today's episode of The Trade Guys. Speaker 3 (0:45) Welcome back to The Trade Guys, everyone. Bill and Scott, it's great to be back with you after a couple of guest episodes over the last few weeks. And one of those episodes previewed the Trump-Xi summit. So I want to start there today and get your reactions now that the summit has come and gone. One of the big headlines coming out of the summit was that Trump and Xi agreed to extend the trade truce until January 10th. But beyond that, a lot of observers described the summit as heavy on pageantry and light on substance. So, Scott, after all the pomp, what did we actually get out of this summit? Speaker 2 (1:15) Well, it's always hard to tell because there's so much that happens that's unseen in conversations, in meetings, in atmospherics with these things. They're difficult to evaluate beyond the public displays, which are often not particularly relevant to what happens in the future. So it appeared to be well-timed and a cordial visit. One thing about President Trump is he's actually a terrific host. He spent his life in the hospitality business. He's a real estate developer, but he develops hotels and resorts. And he himself is a very effective and personable host. So he puts an interesting structure to these things because of his past experience. I think that it appeared to be well done in terms of what they intended to execute. From a trade standpoint or economic policy standpoint, I think it seemed to have the effect of reducing tensions, which I see as a good thing. There is a continuation of we're unhappy with each other's policies to some respect, and we're not prepared to solve all problems, but we're prepared to stop hurting ourselves in the case of things like railroads and fertilizer materials and things that we are essential to import from China. We want to continue to import them at a reasonable cost. Those are the areas where tariffs were reduced. Same goes for the U.S. exports that are essential for the Chinese economy. Nobody had to surrender anything to get there. It looked like a move to sort of calm the waters, which I think is good. Now, I would point out that there are some sizable economic issues that aren't trade-related that were important, were tabled, and seem to be progressing in a reasonable manner. On the forward-looking one, it would be artificial intelligence and the commitment to work together. in that program and the concept as it continues to occupy a lot of the top of mind issues of our government and others. And it's generating obviously massive investment and things like that. So having cooperation or at least understanding of each other's actions on AI, I think is a good thing. The second thing I would note is our strategy in the Iranian conflict has some direct economic impacts on China. In a general sense, discounted petroleum is no longer available. They were a major consumer of Iranian oil one way or another. And that's something that's affecting them that an overreaction or a direct reaction might be unhelpful to the conduct of efforts by the United States and allies in the Gulf. Also, I would note that the operation being run by the Treasury Department of NOFAC has some economic actors from Hong Kong, not a full-fledged bank, but a number of traders who operate out of Hong Kong. have been exposed and essentially put out Speaker 3 (3:58) of Speaker 2 (3:58) business. So that have been anything but difficult for China. And the absence of a reaction or China coming into the conflict in support of Iran, I think is probably helpful overall to what the US and others are trying to achieve. So I think those are the more important economic factors. As a trade guy, I'm glad to see trade kind of cool down a little bit for a while. But you get what you get out of these summits. And maybe five years later, somebody will write the story. Speaker 3 (4:24) Yeah, I want to dig into a couple of things here, but Bill, I want to get your reactions first. And please, folks, if you've not read Bill's column on the summit, please do. Bill, what was the Speaker 1 (4:32) title of that column? He said, she said. One of my favorite titles. Thanks for the free shout out, Alex. That's right. Speaker 3 (4:39) All right. What did you see at the summit? Speaker 1 (4:41) Well, we've been in this doom loop for a long time. One country does something provocative, the other one retaliates. The first one counter-retaliates. Then the second one counter-counter retaliates. Then there's eventually a leaders meeting and they agree to, you know, basically put all that aside, go back to the beginning. And then it starts over again, you know, and we just been repeating the cycle. We are now in, you know, really about a year of hiatus of really not doing that. And I think it's to the credit of both leaders. They seem to have tried to not do that. The problem with Trump, of course, is you're always. one truth social post away from a crisis. And if something happens that he doesn't like, tomorrow morning at 6 a.m., there's going to be the Chinese just did this horrible thing, 50 % tariffs on everything, you know, and then it starts all over again. And so you're in a constant state of uncertainty about that. This time, however, nothing blew up. Nothing of great substance was accomplished. I think the pomp weighed the substance. On the tariff side, $30 billion on each side with reduced tariffs is good. It's always good. They didn't go to zero. They went to MFN rates, which are lower. It did create an interesting anomaly, which was going to come out as other countries start complaining, because if you take U.S. tariffs down to the MFN rate on a lot of these items, which for China included, not critical stuff, toys, games, glassware, things like that, the MFN rate is, you know, between 2 % and 3 % for a lot of this stuff. That means the Chinese imports now are going to have a more advantageous tariff than those from almost every other country that we deal with. Right. So once again, we have an episode here. We're treating our adversaries better than we're treating our friends. And it's not going to be very long before we start hearing from our friends saying, hey, you know, I make glassware too, and we make toys in Germany. And if the Chinese can get them in for two and a half percent, why am I paying 15? the case of the EU, where why am I paying 18 in Malaysia? This is what happens when you have differential tariffs. And, you know, that Trump has opened the door to that. You can expect