What to expect from Trump and Xi Jinping's summit in China

President Donald Trump is expected to arrive in Beijing on Wednesday and is slated to meet with Chinese President Xi Jinping later in the week. Sixteen CEOs will join the president, including Elon Musk of Tesla and SpaceX and Apple’s Tim Cook.

This summit was originally planned for April but then was postponed. The reason given was war in the Middle East. So what might come of this summit?

For more, “Marketplace Morning Report” host Sabri Ben-Achour called up Scott Kennedy with the Center for Strategic and International Studies. The following is an edited transcript of their conversation.

Sabri Ben-Achour: OK, so last time we talked, you were kind of dubious that, you know, much more than like a photo op and some very limited agreements would come out of a Trump-Xi meeting. Has your view changed at all?

Scott Kennedy: From a narrow perspective, the six-week delay between when the meeting was originally going to occur at the end of March, early April, and when it is occurring this week has actually given both sides some time to actually talk about some details with regard to trade and investment and some other issues. And so I think actually once they do meet, there will be a list of deliverables that will be longer than what would have been the case had the meeting occurred six weeks ago. That said, I still think the likely result will be the same, as this meeting consolidates China's turning of the tables on the U.S. over the past year and now sort of be in control of the dial of how calm or uncalm this relationship is.

Ben-Achour: Yeah, China is being described as having become much more powerful. What does that mean for the leverage these two countries have on each other?

Kennedy: Well, when President Trump visited China in November of 2017, China was still basically focused on investing in infrastructure, real estate as its source of growth. It had already, of course, started to put down a lot of cash and investment on tech, but it really hadn't changed gears yet. And so China didn't have a lot of leverage, right? And they had a lot of problems with their economy. And so when the President threatened high tariffs, — which, in today's light look pretty small, at 5% to 10% — the Chinese yelled “uncle” very quickly, and they ended up with a one-sided deal in which they made all the concessions. Now, they've got a lot more tech cards and bargaining chips, things that the U.S. and the rest of the world need, and so that gives them a foundation for pushing back when they meet this week.

Ben-Achour: So what are some of the economic deliverables that might come out of this, and which ones might not also?

Kennedy: So I think they will be able to announce sales of American commercial aircraft and agricultural goods, and I think it's also possible that the two sides will agree to extend the ceasefire that was originally agreed to last October in Busan when the two leaders met. The board of investment idea about, you know, potentially having a vehicle for China to invest at manufacturing in the United States, or portfolio investment, that may not get done this year or may not ever get done.

Ben-Achour: Why is that so contentious?

Kennedy: Well, investment from China in tech may create some jobs. It may create some spillover effects to the rest of the industry, but it may also displace American companies. Detroit is very anxious about having Chinese companies produce and sell in this market right alongside them, potentially at much lower prices, and so we may not see that get over the finish line when they meet this week.

Ben-Achour: China's supply of oil is on the line in Iran. President Trump would, of course, love it if China helped push Iran to make a deal more favorable to the U.S. and Israel. What is China likely to do?

Kennedy: I think China is going to modestly push Iran. But China doesn't see this problem as emanating from Tehran, but from Washington. And of course, in this global competition between Beijing and Washington, getting the U.S. bogged down in the Middle East isn't a bad thing for China. Of course, it hurts their supply of energy. And about one and a half percent of their energy needs come from Iran, and that's starting to raise prices in China. But this conflict also signals to the rest of the world that getting through the energy transition really is important for everyone, and we know which country is most likely to be the best supplier of batteries, electric vehicles, solar, wind. So, in some ways, even if China is facing short term problems because of this conflict in the Middle East, longer term, they may end up benefiting.

Ben-Achour: Reportedly, AI may come up at this summit. This is an area of fierce competition between the U.S. and China. What is there to talk about exactly when it comes to AI between China and the U.S.?

Kennedy: You're absolutely right that AI is a place where there's extensive competition and rivalry between the U.S. and China, because whoever gets to AGI first, the feeling is, gets a big advantage, not only commercially, but in terms of military competition. And the U.S. has been trying to slow China's AI progress down by limiting their access to advanced semiconductors and equipment. At the same time, both sides face some common threats from AI potentially, like loss of control, hallucinations, AI weapons takeover, jobs being lost to AI. And so there may be some really good reasons why, despite their competition with each other, the U.S. and China, which are leading in developing AI, should actually have some dialog about common guardrails that would help not only our two countries, but others as well.

Ben-Achour: One of the fundamental pillars of the tension that's there is economic competition. Is that tension something that will ever get worked out by a summit between China and the U.S.?

Kennedy: I don't think that tension is going to be worked out in this summit and may never be fully addressed, because the U.S. and China are now competing for the exact same part of the economic pie. They're both at the high end. That's a central driver, both believe, to their economies at home and abroad. Now, in some ways, they still are mutually complementary in a variety of different ways. And being connected actually still helps their economies and maybe their national security. So, learning how to walk and chew gum at the same time still may be the better option for both of these countries.