Xi’s Push for Stable World of Low Tariffs Undone by Trump, Putin
(Bloomberg) -- For Xi Jinping, the main objective during two global summits was to push for a peaceful world with fewer trade barriers so he can focus on reviving China’s economy. Donald Trump and Vladimir Putin disrupted those plans.
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In more than a dozen meetings with world leaders over a week in South America, Xi repeatedly sought to win assurances that nations would uphold the international free trade system as Trump threatens to put 60% tariffs on Chinese goods. He also continued to walk a tightrope regarding Russia’s invasion of Ukraine, which took center stage after Putin spooked markets by removing some guardrails on the use of nuclear weapons.
On Tuesday, Xi urged German Chancellor Olaf Scholz to help resolve a tariff dispute with the European Union over electric vehicles and told French President Emmanuel Macron that China didn’t want to see the war in Ukraine escalate, adding that Beijing would “continue to play a constructive role in its own way” to end the conflict.
Those remarks were typical of Xi’s message throughout the G-20 and APEC summits, effectively a call for the world to calm down and avoid taking any drastic moves that could halt trade flows. For Xi, the worry is not just that Trump will impose tariffs that could decimate commerce between the world’s biggest economies: It’s also that other nations will follow suit.
“Xi’s message is that China supports economic globalization and the current international order while the United States is a disruptor that will damage the world economy,” said Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute’s Center for China Analysis. “Xi wants to position himself to third countries as the reasonable party in US-China relations, and the Trump administration as irresponsible if they do not maintain dialogue and guardrails.”
WATCH: Trump Is Facing a Losing Tariff War With China
China’s manufacturing push has driven export growth to the fastest in two years, buoying an economy struggling with a prolonged real estate slump and deflation. Trump’s tariffs threaten to shave several percentage points off China’s annual GDP growth, exacerbating economic pain that has led to rising discontent — and potentially may trigger similar moves by other nations wary of facing a surge of Chinese imports.
Xi sought to offset those concerns at nearly every meeting. At the APEC summit, he made an appeal to “tear down the walls” impeding trade and investment, while at the G-20 he urged leaders to “oppose unilateralism and protectionism.” Xi said his nation was proof poverty can be eliminated, telling leaders “if China can make it, other developing countries can make it too.”
The problem for Xi is that China’s manufacturing prowess — now the highest of any country since the US after World War II — is leaving little room for nations to follow the same growth model of exporting their way to greater wealth. And Xi may soon look to sell more goods to emerging markets rather than take steps to unleash the Chinese consumer, something the Communist Party has traditionally sought to avoid.
Trump’s tariffs may change all that, with Goldman Sachs Group Inc. saying that steeper trade restrictions on China may force Xi’s hand to bolster domestic consumption. His government disappointed investors earlier this month by failing to unleash new stimulus, although Finance Minister Lan Fo’an promised “more forceful” fiscal policy next year — something that may be more essential if other nations hit China with tariffs in response to Trump.
At his meetings in Lima and Rio, Xi received a warm response from leaders in Latin America. He inaugurated a $1.3 billion port in Peru and called on Mexico to “fully leverage the high complementarity of the two economies” in a meeting with President Claudia Sheinbaum. Chilean leader Gabriel Boric brought a copy of Xi’s book on governance and asked for a signature.
Even Javier Milei, who vowed to freeze ties with China on the campaign trial last year, told Xi that Argentina wants to be a “stable, reliable” partner in their first-ever meeting. Xi is set to spend the full day on Wednesday with Brazilian leader Luiz Inacio Lula da Silva.
But things were frostier with US allies and partners, many of whom had one eye on Trump. Canadian Prime Minister Justin Trudeau repeatedly raised concerns about Chinese investments in Mexico, and highlighted his nation’s moves to tariff electric vehicles from China. Australian leader Anthony Albanese sidestepped a question on whether China can be considered a champion of free trade and a potential security partner, saying the nation’s alliance is with the US.
UK Prime Minister Keir Starmer, who had sought to improve ties, brought up concerns over human rights, Taiwan and the trial of Hong Kong media mogul and democracy activist Jimmy Lai — touching on the “red lines” that Xi spelled out in his meeting with US President Joe Biden. That prompted Chinese officials to stand up and order British journalists out of the room before the premier finished his remarks.
China’s readouts for the most part studiously avoided the repeated questions that Xi received in meetings about Putin’s war, which only grew as reports emerged that North Korea planned to send more troops, the US allowed Ukrainian leader Volodymyr Zelenskiy to strike deeper into Russia and Putin changed his nuclear doctrine.
Xi broke with his typically muted approach a few times, acknowledging to South Korean President Yoon Suk Yeol that “a lot has changed” in the region. He separately told Biden that China doesn’t “allow conflict and turmoil to happen on the Korean Peninsula” and it will not “sit idly by when its strategic security and core interests are under threat.”
While those words could reflect unhappiness with both Russia and North Korea as well as the US and its allies, they ultimately show China is currently on the sidelines, according to Patricia M Kim, a fellow at the John L. Thornton China Center and the Brookings Institution
“This is likely an uncomfortable position for Beijing,” she said. “The last thing China wants is a war on its doorstep.”
--With assistance from Maya Averbuch, Marcelo Rochabrun and Samy Adghirni.
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