United States President Donald Trump's announcement last week that he will meet his Chinese counterpart Xi Jinping on the sidelines of this week's Group of 20 summit was greeted with cheer - and caution. Markets and the yuan rose on the news, but pundits threw cold water on the scheduled "extended meeting", saying it was unlikely to deliver a trade deal. Such cautiousness is prudent as global markets were disappointed just last month by the collapse of trade talks between the world's two largest economies when it had appeared that both sides were close to a deal. It turns out the gulf between them is so wide that 11 rounds of talks over almost a year have been unable to bridge it. China finds US demands to fix problems such as lopsided trade and forced technology transfer infringing on its sovereignty; the US feels that nothing short of what it wants will do.

An anticipated meeting between the two leaders at the G-20 summit in Osaka to ink the deal became a non-starter. Instead, what ensued was an escalation of the trade war with Mr Trump raising tariffs to 25 per cent on a total of US$250 billion (S$339 billion) worth of Chinese goods and continuing to go after Chinese tech giant Huawei. The Chinese retaliated with their own tariffs. Mr Trump threatened to impose tariffs on the remaining US$300 billion of Chinese imports, spooking not just businesses on both sides of the Pacific but also the rest of the world, which saw US$1 trillion wiped from markets in the past month as a result of the trade war.