Xi Has 'Bowed To Reality,' Says China Analyst, Urges More Engagement Between Leaders To Resolve Trade Issues: 'No Substitute For Direct Negotiations With Trump'

As U.S. President Donald Trump and Chinese President Xi Jinping break the ice with a phone call after months of silence, analysts weigh in on what’s in store for the U.S.-China trade.

What Happened: The U.S. and China have been at odds over trade for a considerable period. The call signifies some advancement in establishing ground rules for a potential meeting. Jeremy Chan, Senior China Analyst at the Eurasia Group consultancy, stated that this communication suggests a level of respect from President Trump towards President Xi, reported The South China Morning Post.

However, analysts have noted that more than optimistic statements are required to resolve the deeply rooted trade differences between the two nations. Chan further noted that Xi typically consents to meetings with foreign leaders only after substantial groundwork has been laid through lower-level diplomatic efforts.

"Xi has bowed to reality, like so many other foreign leaders before him, that there is no substitute for direct negotiations with Trump," stated Chan, who is also a former U.S. diplomat.

On the other hand, ASPI’s Wendy Cutler highlighted the complexity of the upcoming trade talks and the challenges.

"The likelihood of further misunderstandings, coupled with a fundamental lack of trust, will present enormous challenges for the negotiators as they try to hammer out a deal," cautioned Cutler.

Why It Matters: This phone call comes in the wake of escalating trade tensions between the two countries. On Thursday, U.S. stocks dipped following reports of a phone call between Presidents Donald Trump and Xi Jinping, signaling a possible thaw in China trade tensions. The outreach was said to have come from the U.S. side, as per CNBC, citing Chinese state media.

Earlier in May, President Trump had expressed his willingness to travel to China to meet with President Xi Jinping, emphasizing the importance of the U.S.-China relationship.

In early May, the South China Morning Post reported that the U.S. and China are struggling to resume trade talks. China suggested using special envoys, but the U.S. prefers direct talks between Trump and Xi—a move China considers “risky and uncertain.”

This latest phone call could be seen as a step towards that potential meeting, and a move towards resolving the trade disputes.

Baidu Inc BIDU and Alibaba Group Holding Ltd – ADR BABA climbed 1.13% and 0.43%, respectively, on Thursday. Meanwhile, JD.com Inc. JD declined 0.72%