Presidents Donald Trump and Xi Jinping have hit the reset button in trade talks between the world’s two biggest economies, at least delaying an escalation in tension between the US and China that had financial markets on edge and cast a cloud over the global economy.
But when US and Chinese negotiators sit down to work out details, the same difficult task remains: getting China to convince the United States that it will curb its aggressive push to challenge American technological dominance – and then to live up to its promises.
At the G20 meeting in Osaka, Japan, Mr Trump and Mr Xi agreed to a ceasefire in the trade conflict.
Mr Trump said on Saturday that he would hold off for the “time being” on plans to impose tariffs on 300 billion US dollars (£234 billion) more in Chinese imports – on top of the 250 billion US dollars (£194 billion) he has already targeted.
This decision will jump-start trade talks that stalled last month.
“We’re going to work with China where we left off,” Mr Trump said. He also said China had agreed to buy more American farm products.
Addressing another contentious issue, Mr Trump said he will now allow US companies to sell components to Chinese telecommunications giant Huawei, which last month was put on an American blacklist as a threat to national security.
Mr Trump said Huawei will stay on the blacklist, however, and that its future will not be decided until the end of the trade talks.
Neil Shearing, London-based chief economist at Capital Economics, predicted financial markets will rally with relief when they reopen on Monday.
“But I don’t think this marks the turning of the tide,” he said. “Talks will ebb and flow, but the direction over the next 12 months will be towards renewed escalation because issues around industrial strategy will prove to be so intractable.”
The Trump administration claims China is trying to cheat its way to dominance in the cutting-edge technologies of the future such as artificial intelligence and quantum computing.
In a report last year, the Office of the United States Trade Representative accused Beijing of resorting to predatory tactics to challenge American technological supremacy.
These include forcing foreign companies to hand over technology in exchange for access to the Chinese market; subsidising its own companies (especially those owned by the state) while burying foreign firms in regulations; providing government money so Chinese firms can buy sensitive foreign technology at above-market prices; and stealing trade secrets outright.
Eleven rounds of talks failed to end the stand-off. The United States has imposed 25% import taxes on 250 billion US dollars in Chinese products and the threatened increase in that would extend the tariffs to virtually everything China ships to the United States.
China has lashed back with tariffs on 110 billion US dollars (86 billion) in American goods, focusing on agricultural products in a direct and painful shot at Trump supporters in the US farm belt.