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Trade war

Xi's North Korea trip revives stalled US-China trade talks

Chinese leader widens dinner topics to avoid head-on collision

Chinese President Xi Jinping's visit to Pyongyang on Thursday is said to have paved the way for resumed talks with U.S. President Donald Trump at the G-20 in Osaka later this month.   © Reuters

WASHINGTON/BEIJING -- U.S. President Donald Trump and Chinese President Xi Jinping are planning to meet over dinner on June 29, a source told Nikkei.

The meeting, their first in seven months, will be held after the Group of 20 summit wraps up in Osaka, Japan.

After a rapid unraveling of talks in May and a stalemate since, it was the arrangement of Xi's trip to North Korea that brought the Chinese leader back to the negotiating table.

Xi will meet North Korean leader Kim Jong Un during a two-day trip to Pyongyang starting Thursday, becoming the first sitting Chinese president to visit the North in 14 years.

The trip will enable Xi to use the North Korea card as a potential buffer should trade talks collapse.

Little progress has been made so far on the Korean Peninsula, with Washington demanding a complete denuclearization and Pyongyang calling for a step-by-step approach. Positioning himself as North Korea's patron, Xi believes he can help bridge the two sides.

North Korea is one of the few topics where Xi can take the lead with the U.S. And while Xi risks losing face if a summit purely focused on trade falls apart, he could divide the attention of the international community by adding Pyongyang into the mix.

That comfort may breathe new life into the trade negotiations.

"I know that China wants to make a deal," Trump told reporters Tuesday after announcing on Twitter that the two leaders had agreed to meet at the Osaka G-20. "They don't like the tariffs. A lot of companies are leaving China in order to avoid the tariffs," he said.

In a tweet, Trump said that he and Xi will have an "extended" meeting at the G-20. Meanwhile, Xi said the leaders will exchange opinions on issues fundamental to China-U.S. ties, according to a Chinese state broadcaster. Experts believe this is a sign that they have agreed to discuss a wide range of topics, including North Korean denuclearization.

U.S. Trade Representative Robert Lighthizer told the House of Representatives Ways and Means Committee on Wednesday that he will speak by telephone with Chinese Vice Premier Liu He, the country's chief negotiator in the trade talks, "in the next day and a half" and then expects to meet with him in Osaka along with U.S. Treasury Secretary Steven Mnuchin before Trump's meeting there with Xi.

Trump and Xi had agreed to work toward resolving the trade dispute when they met in December 2018. The countries crafted a 150-page draft agreement covering areas like intellectual property protections and currency rates in the working-level talks that followed.

Then China demanded major revisions in May, which slammed the brakes on negotiations and triggered further tariffs on both sides. The U.S. has now blacklisted Chinese telecommunications equipment maker Huawei Technologies, while China is hinting at export restrictions on rare-earth metals.

Trump, who just announced his bid for reelection Tuesday, is eager to cinch a trade deal with China to boost his support. "Once Trump starts campaigning, he'll be desperate for an agreement," said Liang Ming, director of the Institute of International Trade under China's Ministry of Commerce.

The U.S. is preparing another round of tariffs on China that would affect nearly all still-unaffected shipments from the country. It is hinting that it is ready to put these into effect immediately should the upcoming talks fall apart.

The trade war between the world's two largest economies threatens the global economy as a whole. But they remain deeply divided on key topics, particularly on China's industrial subsidies.

The U.S. wants China to scrap state aid to businesses, including by regional governments, while China is reluctant to do so on the view that subsidies are a key part of China's economic system. Regarding tariffs, China wants them all scrapped in any prospective trade deal, while U.S. wants to keep some of in place.

"There's nothing more I can do," Liu, who led the Chinese delegation, reportedly said after ministerial talks in Washington in May. Further progress will require action from the countries' top leaders, but the path to get there seems far from clear.

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