Chinese President Xi Jinping and President Donald Trump attend a welcoming ceremony November 9, 2017 in Beijing, China. | Thomas Peter-Pool/Getty Images trade Trump and Xi to meet as trade war damage grows Both leaders are facing mounting pressure at home to soften tensions.

President Donald Trump and Chinese President Xi Jinping are both facing intense domestic pressure to de-escalate the trade war between their countries as they prepare to meet on Saturday in Japan.

Trump needs China to make vast structural changes to its economy while also buying more U.S. farm and manufactured goods. Xi needs Trump to lift the tariffs he has put on Chinese imports. With the economic strain mounting on both sides, the two are widely expected to use the G-20 summit in Osaka as an opportunity to start talking again after negotiations broke off abruptly in May.


In one sign of a thaw, Robert Lighthizer and Chinese Vice Premier Liu He spoke by phone on Monday. Lighthizer and Treasury Secretary Steven Mnuchin are expected to meet with their Chinese counterparts in Osaka before Trump and Xi meet.

“President Trump likes deals, so he might agree to something,” said Matthew Goodman, a former White House international economics adviser during the Obama administration, who now is at the Center for Strategic and International Studies. “More likely is that they will agree to a truce, and to restart talks, and in a time-limited way, try to come to some sort of deal within three months, let’s say.”

In a briefing call with reporters on Monday, a senior administration official said Trump is “comfortable with any outcome” of the meeting with Xi because the U.S. is in a strong position. But Trump’s trade war is facing mounting criticism at home.

The U.S. government has collected billions of dollars of additional tariff revenue, but that barely has made a dent in the nation’s skyrocketing budget deficit as a result of Trump’s tax cuts and increased federal spending. Farmers are hurting, with farm exports to China projected to plunge to $6 billion this year from $26 billion during the Obama administration. And U.S. retailers including Walmart and Macy’s are warning of price hikes if Trump moves forward with a plan to impose a 25 percent tax on almost all remaining Chinese goods.

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“I think Trump has painted himself into a corner on this,” said Bill Reinsch, a trade policy expert at the Center for Strategic and International Studies. Since China is unlikely to make the sort of sweeping reforms the administration is demanding, “eventually Trump is going to figure out his choice is between a weak agreement and escalating the trade war.”

Xi is not under the same reelection pressure as the leader of a country with a long history of authoritarian rulers, Reinsch said.

“It’s not a market economy. I think they can outlast us,” Reinsch said.

Chinese officials on Monday stressed the need for both sides to compromise.

“We should meet each other halfway, which means that both sides will need to compromise and make concessions, and not just one side,” Wang Shouwen, China’s vice minister of Commerce and a top deputy on the negotiating team, said during a press briefing.

Still, flagging growth and soaring food prices in China are creating pressure on Xi to make a deal.

Xi has consolidated power since becoming head of the Chinese Communist Party in November 2012 and the country’s president a few months later. But during his tenure, economic growth has fallen from about 8 percent annually to an estimated 6.6 percent in 2018. The International Monetary Fund predicts growth in China will fall to 6 percent in 2020, partly as a result of the trade war.

That’s a concern in a country where citizens have come to expect improved living standards even if their demands for more democracy have become muted. Meanwhile, the cost of food in China was up 8 percent in May from the previous year, and overall inflation is at a 15-month high of 2.7 percent.

The severe stress on Chinese telecommunications giant Huawei, which the U.S. Commerce Department put on a trade blacklist last month over national security concerns, is another pressure point for Xi.

The threat of more tariffs in particular puts Trump is in a much stronger position than Xi, said Derek Scissors, a China policy hawk at the American Enterprise Institute.

“If we went to an across-the-board 25 percent tariff on all Chinese goods, they’d have a balance of payments crisis in three or four months,” Scissors said. “You’d have people fleeing the renminbi in droves. We can force them to devalue their currency, which would make Xi look like he completely blew this.”

The average Chinese citizen might not feel much impact as result. But it would discredit Xi’s leadership and could force China to cut spending on its “Belt-and-Road” infrastructure initiative that spans Asia, the Middle East, Africa, Europe and Latin America.

So, Xi’s best hope for Osaka is an agreement with Trump that puts additional U.S. tariffs on hold while the two sides resume talks on a deal, Scissors said. But if Xi achieves that, he could drag out negotiations in the hope that America chooses a new leader in 2020, Scissors added.

Many companies, large and small, are anxious for the two sides to reach an agreement and frustrated by the preoccupation with who has the stronger hand.

The U.S.-China Business Council would welcome an agreement to restart negotiations because that would help reduce business uncertainty, especially if there is a deadline to reach a deal, the group’s vice president Erin Ennis said.

“At this point, we’ve got 25 percent tariffs on $250 billion worth of imports. The longer those tariffs are in place, with no plan of action to address them, the more damage is being done,” Ennis said.

Anita Kumar contributed to this report.