Cease-fire in the trade war. The United States has expressed to Beijing its willingness to delay the imposition of 25 percent tariffs on at least another $300 billion in Chinese goods following talks between U.S. President Donald Trump and Chinese President Xi Jinping on Saturday, Bloomberg reported. Treasury Secretary Steven Mnuchin added to the optimism, saying the two sides are “90 percent of the way” to a deal to end the trade war altogether. It makes sense for the U.S. to hold its fire at this stage. The self-inflicted economic costs of tariffs on Chinese exports could be staggering, as evidenced by the multitude of companies filing protests at the recent Commerce Department hearings on potential new tariffs. A cease-fire, moreover, is hardly the same thing as a trade deal, so the possibility that the U.S. may eventually make good on its threat will still be hanging over Beijing’s head, ostensibly giving Beijing reason to make greater concessions to U.S. demands whenever negotiations resume in earnest. From a tactical perspective, what the U.S. wants most is leverage, and it arguably gets more by threatening tariffs than it gets by imposing them, considering the political and economic damage they could incur. Which makes the phone call on Monday between the U.S. and Chinese trade chiefs all the more interesting. They reportedly discussed how each side could portray to its domestic audience the resumption of talks as a win. If a deal is ever going to be reached, the U.S. will have to find a way to let Beijing save face rather than publicly demanding its total capitulation. But don’t expect Beijing to concede much more than what is needed to effectively stall in hopes that the U.S. will eventually be forced to settle for little more than what’s already on the table.
Returning to the INF. If Russia doesn’t re-implement the Intermediate-Range Nuclear Forces Treaty before Aug. 2, NATO will have to act, head of the alliance Jens Stoltenberg said June 26. Stoltenberg ruled out the possibility of deploying new ground-based nuclear missiles in Europe but urged European countries to test the effectiveness their missile defense systems. A Russian deputy foreign minister responded by saying Moscow is ready to counter whatever NATO does. The government in Moscow left the treaty, but left open the possibility that it would return under the right conditions, and according to the chairman of the foreign affairs committee of Russia’s Parliament, one such condition would be Washington’s return and compliance with the treaty. Stoltenberg, for his part, said there were no indications Russia had the intention to comply.
Competition in the Eastern Mediterranean. The U.S. and Russia are increasingly involving themselves in the Eastern Mediterranean, thanks to the competition over energy there. The U.S. Senate Committee on Foreign Relations pushed through a bill that lifts an arms embargo on Cyprus, increases energy cooperation with Cyprus, Greece and Israel, establishes U.S. oversight over potential Turkish violations in Cyprus’ exclusive economic zone, and bans the transfer of F-35 fighter aircraft to Turkey if it accepts the delivery of the S-400 missile defense system from Russia. In addition, the U.S., U.K. and Israel conducted a joint defensive counter-air exercise over the Eastern Mediterranean that included F-35 variants from all three countries. Potentially adding fuel to the fire is Lebanon, which may request Russian mediation to demarcate its maritime border with Syria. Having these boundaries established, or at least under controlled discussion, would benefit Russian business interests. Russia’s Novatek, Italy’s Eni and France’s Total are in a consortium slated to start exploration activities off Lebanon’s coast in December. These companies experienced difficulties with a similar project in 2017 when Israel once again contested the maritime border with Lebanon. The U.S. is informally mediating talks to establish the maritime border, with formal talks expected to start in July.
Pompeo in India. Indian Prime Minister Narendra Modi and External Affairs Minister Subrahmanyam Jaishankar have met with U.S. Secretary of State Mike Pompeo to discuss bilateral ties ahead of meetings on the sidelines of the G-20 summit. Topics included energy, trade, Afghanistan, terrorism and Indo-Pacific security. Jaishankar said India valued its relationship with the United States but stressed repeatedly that India will prioritize national interests when dealing with other countries. His position certainly pertains to India’s acquisition of the S-400 missile defense system from Russia. Trade was also a sticky issue. Over the past six months, India and the U.S. have both passed regulations that irked the other, spurring a series of low-level tit-for-tat trade measures. The waiver granted to India for the use of Chabahar Port, which is vital for trade with Afghanistan, did not come up. The U.S. highlighted its surge in oil exports to India as progress toward getting India to reduce its oil imports from Iran. The big takeaway is that U.S.-India relations are never simple but always essential to Washington’s strategy to counter China.
- During a trip to Kabul, U.S. Secretary of State Mike Pompeo said Washington hopes to strike a peace deal in Afghanistan by Sept. 1. He added that the Taliban is clear on the U.S. intention to remove troops, though no timeline has been established.
- Israeli Prime Minister Benjamin Netanyahu is considering proposing legal measures that would allow snap elections scheduled for Sept. 17 to be cancelled. The speaker of the Israeli Parliament is also amenable to the measure.
- A U.S. judge found three large Chinese banks in contempt for refusing to comply with subpoenas in an investigation into North Korean sanctions violations, putting them at risk of being cut off from the U.S. financial system.
- South Korean President Moon Jae-in said the U.S. and North Korea have opened talks on a potential third summit between Donald Trump and Kim Jong Un.
- U.S. chipmakers are reportedly finding ways around the U.S. ban on exports of components for future products made by Chinese telecommunications giant Huawei.
- Anti-Russia protests near the Georgian Parliament building have resumed, with some demonstrators even going on a hunger strike.
- More than 70 current and retired senior officers with China’s People’s Liberation Army have reportedly been demoted for their involvement in a corruption scandal involving former Chief of Joint Staff Gen. Fang Fenghui.
- Chinese imports of U.S. soybeans and pork products fell by more than 55 percent year-on-year through May.
- Japan will hold upper house elections on July 21.