WASHINGTON—China is pinning its hopes on another meeting between President Trump and Chinese leader Xi Jinping to help solve the trade dispute between the world’s two largest economies, according to people briefed on the matter, as a wide gap remains between U.S. demands and what Beijing is willing to offer.
The Chinese delegation led by Vice Premier Liu He—Mr. Xi’s economic czar who is holding talks with American negotiators in Washington this week—has proposed to the U.S. that Mr. Trump meet with Mr. Xi in the seaside Chinese resort city of Hainan after his planned summit with the North Korean leader, Kim Jong Un, in late February, the people said.
In a tweet Thursday morning, Mr. Trump indicated he is open to a new meeting with Mr. Xi. “No final deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the long standing and more difficult points,” Mr. Trump wrote.
Mr. Liu didn’t focus on the proposed meeting during Wednesday’s talks, said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce, who has been briefed on the talks. Instead, he is saving that for his conversation this afternoon in the Oval Office with Mr. Trump.
The invite comes as Mr. Liu delivered a package of modest concessions for the trade talks that started Wednesday, the people said. It includes more Chinese purchases of U.S. farm and energy products and promises to invite more American capital into the manufacturing and financial-services sectors.
But the offer falls short of what Washington has been asking for, which includes deeper changes in what it calls Beijing’s protectionist industrial policies that hamstring U.S. competitors. The two sides are still far from a deal, and they aren’t expected to agree today to a written framework with blanks left for areas where there is disagreement—the kind of document that is standard in trade negotiations.
“We are in the fifth inning of a nine-inning game,” said Mr. Brilliant. “The president sees this as an historic opportunity, but the question is whether the administration can deliver on a comprehensive deal with the Chinese.” The U.S. Chamber, along with many business groups, have been pushing the White House not to settle too easily with the Chinese and to insist on significant changes in Chinese industrial and technology policies.
In another tweet, Mr. Trump said “meetings are going well with good intent and spirit on both sides. China does not want an increase in Tariffs and feels they will do much better if they make a deal. They are correct.”
Later, he said in a tweet that he was “looking for China to open their Markets only to Financial Services, which they are now doing, but also to our Manufacturing, Farmers and other U.S. businesses and industries. Without this a deal would be unacceptable!”
By agreeing to a meeting, some of Mr. Trump’s advisers believe the president is putting himself in a position where he will face enormous pressure not to escalate tariffs on Chinese goods from 10% now to 25% on March 2, as he has threatened. That’s because the build-up for the meeting—and the expectations of a deal—will be so high that a negative outcome would tank markets globally and batter both economies.
That is especially the case if the two leaders were to meet in China, as Chinese officials want. A decision then to raise tariffs would be a slap in the face for the Chinese leader, whom Mr. Trump regularly refers to as a friend. Instead, the pressure would be on the U.S. to reduce tariffs.
Some of Mr. Trump’s advisers are urging that he meet elsewhere with Mr. Xi, either in a third country or even at Mr. Trump’s Mar-a-Lago estate in Florida. Mr. Brilliant said he doubts a decision about the location will be made until closer to the March deadline.
“The best hope for getting a deal is a face-to face-meeting” between the two leaders, said Brookings Institution China scholar David Dollar. “The U.S. economy is decelerating and the pressure is on Trump is to make a deal.”
Mr. Dollar added that even keeping the current 10% tariffs in place “would be hard for Xi Jinping to accept.”
At the same time, Beijing is also unlikely to accept U.S. demands to remake its industrial policy and scale back the role of the state in the economy, said Cornell University China expert Eswar Prasad.
“The more likely scenario is a deal where Trump declares victory, which is relatively modest in scope, and the two sides de-escalate tension and continue discussions on complicated issues left unresolved,” said Mr. Prasad, who speaks regularly with Chinese officials.
When the two leaders met on Dec. 1 in Buenos Aires, expectations in the financial markets were so elevated for a deal that the president and his advisers felt he had little option but to agree to a truce.
At that time, the U.S. had threatened to boost tariffs to 25% from 10% on January 1. Instead the two sides agreed to a 90-day truce while negotiators tried to reach a deal. If they couldn’t, tariffs would increase at 12:01 a.m. on March 2.
Treasury Secretary Steven Mnuchin said on Fox Business Network on Jan. 29 that cuts in tariffs are a possibility. “Everything is on the table,” he said. Mr. Mnuchin and U.S. Trade Representative Robert Lighthizer have jockeyed for power over China policy for the past year.
At the Buenos Aires meeting, Mr. Trump named Mr. Lighthizer the top negotiator. Mr. Lighthizer has long argued to keep tariffs in place—or even boost them—to keep pressure on China. With Mr. Trump agreeing to meet with Mr. Xi, the president has effectively become the chief negotiator, giving Mr. Mnuchin a bigger chance to influence policy.
The president’s decision to meet with President Xi comes as negotiators from China meet with their U.S. counterparts for a second day Thursday in the Eisenhower Executive Office Building near the White House. People briefed on the talks have characterized the changes in policy and purchases that the Chinese negotiators are offering thus far as modest.
Write to Lingling Wei at lingling.wei@wsj.com and Bob Davis at bob.davis@wsj.com
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