Trump and China's Xi meeting could be 'breakthrough'

US economy is in good shape, China's is not: Larry Kudlow

National Economic Council Director Larry Kudlow on the Trump administration's trade negotiations with China.

President Trump is preparing for a face-to-face sit down with Chinese President Xi Jinping in what is being described as one of his most critical meetings of his presidency, as the two nations are stymied by “unsatisfactory discussions” over trade.

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"This is a big deal, this meeting, and the stakes are very high,” said White House economic adviser Larry Kudlow during a briefing with reporters on Tuesday.

The leaders of the world’s two largest economies will meet on Saturday at the Group of 20 summit in Buenos Aires, Argentina. Specifics on the dinner meeting, including who else may attend, are still being hashed out, according to the White House.

Trump, who famously co-wrote “The Art of The Deal,” will likely be putting his master negotiating skills to work.

"President Trump has a terrific track record as a negotiator and he will know through fact and instinct how to handle this,” said Kudlow, while also noting that Xi has some of the same skills. “My suspicion is President Xi likewise … they know how to handle themselves, they know what the stumbling blocks are. Both sides are being frank and candid,” he noted.

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Trump has repeatedly stated that the Chinese want to make a deal, but little progress has transpired. At issue, billions in tariffs that are harmful to the economies of both countries, intellectual property theft by the Chinese and cyber security. Earlier this month, the U.S. Justice Department indicted two companies based in China and Taiwan, and three individuals on charges of stealing trade secrets from Micron, the Idaho-based semiconductor company, according to then-Attorney General Jeff Sessions, who resigned at Trump’s request earlier this month. 

Also, former Microsoft CEO Steve Ballmer, in an interview with FOX Business, bashed China saying 90 percent of companies in the country are using the Microsoft operating system, though only 1 percent are actually paying for it. Ballmer says the theft has to end. “I’m a free trader, by nature. I went to the school of economics – it’s the best thing for the world,” Ballmer told Maria Bartiromo. “This one’s a tricky issue because it’s absolutely clear that the rules don’t apply in China, and the U.S. government needs to do something" he said.

While the stakes are high, Trump continues his tough stance. On Monday, in an interview with The Wall Street Journal, Trump warned that he won't shy away from tariffs if no deal comes together. “If we don’t make a deal, then I’m going to put the $267 billion additional on,” at a tariff rate of either 10% or 25%, Mr. Trump said.

Investors remain sensitive to tariffs and the negative impact of a full-blown trade war. Volatility continues to roil global financial markets, as headlines on trade surface without a resolution on the horizon.

U.S. stocks, coming off a rocky two months of trading, are little changed for the year with the S&P 500 and the Dow Jones Industrial Average sitting with fractional annual losses.

TickerSecurityLastChange%Chg
I:DJIDOW JONES AVERAGES25883.25+443.86+1.74%
I:COMPNASDAQ COMPOSITE INDEX7472.4101+45.46+0.61%
SP500S&P 5002775.6+29.87+1.09%

Despite the optimistim ahead of the Saturday sitdown, Kudlow recently told FOX Business, "you’re not going to get a deal unless it suits American interest. That’s a key point that President Trump is making" he said.