In Trump-Xi Fight, Both Leaders Make Big Bets That May Backfire

in dlike •  19 days ago  (edited)

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When Xi Jinping first met Donald Trump back in 2017, the Chinese leader said they had “a thousand reasons to make the China-U.S. relationship a success, and not a single reason to break it.”

Two years on, ties are at their lowest point in decades -- and they appear to be worsening by the day. Trump’s threat to raise tariffs on all Chinese goods last week shattered a truce reached with Xi just weeks earlier, unleashing tit-for-tat actions on trade and currency policy that risk accelerating a wider geopolitical fight between the world’s biggest economies.

A big part of the problem is that neither leader believes the other is serious about making a deal: China sees Trump as posturing ahead of the 2020 election, while U.S. officials think Xi is looking to wait him out for a better deal. Either way, the political space for compromise is diminishing as hardliners take center stage, prompting investors to weigh the potential economic fallout.

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As these two heavyweights continue to duke out inside the ring, the global economy suffers. Smaller economies could collapse in this process. Like it or not, the world is moving into two reigning orbits - one led by China and the other one led by the U.S. Nations will have to decide which camp to join so they can fall under the economic bloc and enjoy free to low tariffs.