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Hopes Slim for End to Trade War When Xi Jinping Meets Donald Trump at the G-20

5 minute read

World leaders descend on Buenos Aires this weekend for the G-20 summit, with Russia’s seizure of Ukrainian sailors, the murder of Saudi journalist Jamal Khashoggi, and Britain’s impending exit from the E.U. all high on the agenda.

But while substantial progress is not expected on these issues in the Argentine capital — the G-20 is oft-derided as a costly talking shop — many hope for meaningful headway on one burning issue: the escalating trade war between China and the U.S.

Chinese President Xi Jinping is expected to sit down with U.S. President Donald Trump on the G-20 sidelines with hopes for a negotiated resolution to the hiked tariffs he’s put on $250 billion Chinese imports.

Trump has also threatened tariffs on $267 billion of other Chinese exports while Beijing has responded with $110 billion of its own tariffs on U.S. products, with the tumult upsetting global supply chains and imperiling economies across the globe.

“It got bigger than anyone thought it was going to get,” says Jeffrey Towson, a private-equity investor and business professor at Peking University. “Trump has shown his hand, that he’s willing to take it to a more serious level. China hasn’t really given an indication that they’re going to match that or try something else.”

Although this month Trump indicated that a deal could be struck, his administration has also accused China of not improving “unfair” practices in an update to a March report.

Read more: Farmers Know Trump’s Trade War Is Hurting Them

Trump has long said that intellectual property theft, currency manipulation and aluminum and steel dumping by Beijing contribute to a record $375 billion trade deficit. There’s little sign that the tariffs are correcting that, however, with China’s monthly trade surplus rising to an unprecedented $34 billion in September.

Nevertheless, analysts are skeptical that any deal could be thrashed out. China appears willing to renegotiate certain aspects of policy, such as boosted IP protection and cyber security regulations, as well as increased market access to bring it into line with WTO rules.

But Trump has repeatedly said he wants to bring down the trade imbalance by a whopping $200 billion, which would require China imposing artificial limits to trade. Not only is this highly problematic for the world’s largest trading nation, it would also run counter to WTO rules.

“The irony is that China is now in a position of trying to uphold the WTO system, and essentially the rule-based international trading order, while Trump has no use for rules, he’s a results-based businessman, and doesn’t want to be constrained by rules or laws,” says James H. Nolt, a China specialist for the World Policy Institute.

The Trump administration appears to be eyeing a system similar to the “voluntary restraint agreement” that the Reagan government imposed from April 1981 to limit the number of Japanese vehicles imported into the U.S.

Read more: Even this Chinese CEO Who’s Benefiting From Trump’s Trade War Says It’s a Dumb Idea

But while that was relatively straightforward to implement — the handful of Japanese automakers divvied up their own market shares, and instead increased profits by producing higher-quality cars — Chinese trade is spread amongst hundreds of thousands of small and medium-sized exporters. It would also run foul of the WTO, which was formed in 1995 precisely to boost free commerce.

Meanwhile, real action to address the trade imbalance — though nowhere near the quixotic $200 billion target — would be to negotiate Chinese market access for U.S. financial services providers. This is something that the Beijing government has repeatedly supported, though repeatedly stalled rolling out, and has the potential to benefit both nations’ economies.

Trump, however, is no friend of the banks, being a debtor and many times bankrupted himself, and is lukewarm on the prospect. This is not least that expanding financial services to China won’t bring home the low-skilled manufacturing jobs that appeal to his base, and in fact could even facilitate U.S. businesses shifting capacity to China.

That leaves both nations at something of an impasse, with the real fear that Trump might move ahead with the extra tariffs. What China can realistically offer to counter this is unclear.

“No country is going to cede sovereignty that way and give up treaty rights, least of all China, which of course suffered under unequal treaties during the 19th and early 20th century,” adds Nolt. “They’re quite content to have a rules-based system, even to agree to modified rules, but they’re not going to agree to them based on power alone and ‘might makes right.’”

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Write to Charlie Campbell / Lijiang at charlie.campbell@time.com