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Trade war

APEC is canceled, but US says trade deal still planned

China reportedly suggests hosting Trump-Xi summit in Macao

U.S. President Donald Trump and Chinese President Xi Jinping were scheduled to meet in Chile on the sidelines of the APEC summit in mid- November.   © AP

SAO PAULO/NEW YORK -- Chile has suspended next month's Asia-Pacific Economic Cooperation summit in Santiago, where U.S. President Donald Trump and Chinese President Xi Jinping were expected to sign an interim agreement to ease the 15-month old trade war.

Chilean President Sebastian Pinera announced the decision Wednesday, along with the cancellation of a major climate summit in December, saying his administration needs to prioritize "reestablishing public order" amid violent anti-government protests in the country sparked by a subway fare hike.

The suspension spurs worries over the timeline of a "Phase One" trade deal between the U.S. and China, which was widely expected to be signed by the leaders of the two countries on the sidelines of the forum, originally scheduled to take place Nov. 16-17.

"As of now, it appears APEC will not occur in Chile, and it's our understanding the organization does not currently have a secondary site prepared," Hogan Gidley, White House principal deputy press secretary, said in a statement to reporters. "We're awaiting potential information regarding another location."

"We look forward to finalizing Phase One of the historic trade deal with China within the same time frame, and when we have an announcement, we'll let you know," the spokesperson added.

Think tank Eurasia Group said in a Thursday note that "With Santiago now off limits, the two sides will need to seek a new third and neutral-venue or potentially a bilateral site for the meeting."  

China has reportedly suggested hosting the Trump-Xi summit in Macao instead. But a Trump visit to Macao, in close proximity to Hong Kong, could be a major victory for Xi.

Demonstrators climb atop a riot police vehicle during a protest against Chile's government in the city of Valparaiso on Oct. 30.   © Reuters

Ahead of the forum's cancellation, Chinese Foreign Ministry spokesperson Geng Shuang said at a regular press conference Thursday that the two negotiating teams "affirmed that technical consultations on part of the text have been basically completed."

Cancellation of the summit increases uncertainty around the timing for the Phase One agreement, but the risk of a delay into 2020 or of talks breaking down remains modest, analysts at Eurasia said in a Thursday note.

Both Trump and Xi have incentives to keep talks on track, avoiding further escalation that poses economic and political risks, the analysts said.

"Our call has been a 70% probability the deal is essentially finalized by APEC; we would now provisionally extend this deadline to the end of year with the same odds," the note said.

The Dec. 15 deadline for the U.S. to impose new tariffs on China could propel action by both sides. But if talks drag on, one of the many stresses on Sino-American relations -- such as Hong Kong -- could disrupt momentum, the analysts cautioned.

The analysts also regard a meeting between Trump and Xi as important for agreeing on the parameters of an eventual "Phase Two" deal, given that both leaders likely will need to make larger concessions for a more comprehensive agreement. 

"If Trump and Xi do not meet in person soon, progress towards a [Phase Two deal] will likely be even slower than our expectation," the note said.

Japanese Prime Minister Shinzo Abe was also slated to attend the Asia-Pacific summit. With Washington sending only a relatively low-level delegation to next week's East Asia Summit in Thailand, the APEC cancellation creates a further setback for American diplomacy in the region, if no alternative venue is given.

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