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U.S.-China ‘Phase One’ Trade Deal in Limbo After Chile Cancels Summit Headlined by Trump, Xi

Last Updated September 23, 2020 1:14 PM
Sam Bourgi
Last Updated September 23, 2020 1:14 PM
  • Chile cancels APEC summit over ongoing protests.
  • President Trump and China’s Xi Jinping were scheduled to hold face-to-face talks at the upcoming summit.
  • No update has been provided on when the two leaders will meet again.

A planned summit in Chile that promised to bring together U.S. President Donald Trump and Chinese counterpart Xi Jinping was canceled Wednesday due to ongoing protests across much of the Latin American country.

The announcement raises concerns that the United States and China may have to delay finalizing their ‘phase one’ trade deal. For investors, this means more uncertainty about the path forward in U.S.-China trade negotiations.

APEC Summit Cancelled

Chile protests
Rocked by riots and protests, Chile was forced on Wednesday to cancel the upcoming APEC summit in Santiago. The demonstrations have left at least 20 people dead. | Image: CLAUDIO REYES / AFP

Chilean President Sebastian Pinera announced Wednesday that the upcoming Asia Pacific Economic Cooperation (APEC) summit would not go on as planned due to ongoing protests across the country.

“This has been a very tough decision,” Pinera said, according to CNBC . “But it is based on the wise principle of common sense.”

Just two days prior, Chile’s government said it would go ahead with the conference, but ongoing riots and protests across the country forced officials to quickly reconsider.

APEC was scheduled for Nov. 16-17 in Santiago and was supposed to be the venue for a face-to-face meeting between Trump and Xi. As Bloomberg reports, President Trump was eyeing APEC as the landmark summit for finalizing his preliminary trade deal with China .

U.S.-China Trade Deal in Limbo

APEC’s cancellation has raised questions about how and when the leaders of China and the U.S. will resolve their trade dispute. It also raises the risk that a more comprehensive trade agreement won’t be reached anytime soon.

Both countries have yet to finalize a ‘phase one’ trade deal that was agreed to in principle earlier this month. Under the conditions of phase one, Washington will freeze tariffs on Chinese imports in exchange for more agricultural purchases from Beijing.

But China has also warned the United States not to backpedal on the progress already made, urging the Trump administration to avoid aggravating the trade war.

These sobering thoughts were expressed in at least two articles from Chinese state-run media shortly after the phase one agreement was announced. For example, the People’s Daily warned the U.S. that there are no winners in a trade war and that both countries must avoid falling into a “lose-lose trap.”

Even if the preliminary deal were signed tomorrow, it still doesn’t resolve many of the long-standing issues that have undermined trade talks for the better part of 15 months. Chinese industrial policy and intellectual property laws still need to be addressed before the Trump administration agrees to end the tariff war. Progress on these fronts remains far off.