A deal at the G20 summit would be consistent with this pattern. But so would a breakdown in Buenos Aires, followed by a brief extension of anti-China tariffs and then, a few months or weeks later, another Trump-Xi summit and another “victorious retreat.” Think of the British in June 1940 seeing their retreat from Dunkirk as a great triumph.
Finally, the fact that Xi cannot afford to lose this early phase of the US-China conflict does not mean that Trump must be seen to lose it. A draw or ceasefire would be perfectly acceptable for China and would almost certainly satisfy Trump, judging by past experience. Trump could win personal kudos with a compromise that involved some concessions, both real and apparent, that Xi is willing to make – on the size of the trade imbalance, on intellectual property laws, on further market opening for US multinationals and financial institutions, and so on.
In fact, China has already agreed that it could meet roughly 40% of the 142 trade demands presented by the US earlier this year, and could negotiate a further 40%. It is the remaining 20%, involving technology and industrial subsidies, that are non-negotiable for China. Of course, this 20% covers most of the policies that militant Sinophobes denounce, because they could enable China to challenge US technological and military hegemony by the second half of this century.
But does Trump really care about what may happen after 2050? Assuming he cares more about what happens in 2020, when he must face American voters again, his confrontation with China will end before too long.
Anatole Kaletsky is chief economist and co-chairman of Gavekal Dragonomics. A former columnist at the Times of London, the International New York Times and the Financial Times, he is the author of "Capitalism 4.0, The Birth of a New Economy," which anticipated many of the post-crisis transformations of the global economy.