Duo’s lingo: what to watch for in Trump-Xi summit

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0:55The Economist

1:02Hello and welcome to The Intelligence from The Economist. I'm Jason Palmer.

1:06Rosie Blau:And I'm Rosie Bloor.

1:11Today on the show, the latest in the century-long Coke versus Pepsi battle and a curtain raiser on a particularly fraught Venice Biennale.

1:26First up, though.

1:35Rosie Blau:Tomorrow, Donald Trump and Xi Jinping will meet in Beijing. The two-day summit, originally scheduled for April, was delayed by the Iran war. Even so, both sides seemed determined to make it happen. The meeting is the first of four between Trump and Xi planned for this year, a sign of the urgency both sides feel about calming this consequential, but often tempestuous, relationship.

2:00Simon Rabinovitch:The Chinese-American relationship was in a really, really bad way last year. They were on the brink of a massive economic conflict that really threatened a global recession.

2:13Rosie Blau:Simon Rabinovich is our Beijing Bureau Chief and Chao Guang columnist.

2:17Simon Rabinovitch:They've walked back from the ledge of that. And the question for this year is, are they going to be able to build something bigger, more constructive and more sustainable out of that?

2:30Rosie Blau:So just fill in a bit more of that context for us for a minute, Simon. Why were US-China relations quite so bad?

2:38Simon Rabinovitch:So China and America have been in a on-again, off-again trade war, going back to Donald Trump's first term. And at the start of 2025, things were looking really quite dangerous. We got to a point where both countries had tariffs of more than 100 % on each other, effectively threatening a stop to all bilateral trade. At the same time, China was fighting back with much more force than it had ever done previously. It put export controls on rare earths, which were threatening to bring not just American industry, but global industry to a total halt. That caught Donald Trump's attention. And that's why by the end of last year, they had agreed to a truce.

3:19Simon Rabinovitch:It's a truce that only runs until November of this year. And so we're now at the point where diplomacy is once again underway. They're trying to come to some kind of a more lasting trade deal, economic arrangement that will avoid the kinds of problems that we saw last year.

3:39Rosie Blau:So if we've got to the point where diplomacy is key, what can we actually expect from this summit?

3:45Simon Rabinovitch:Well, depending on when you would have asked me that question, the answer would have been different. A few months ago, people had quite high expectations. They thought that maybe there was going to be some big bilateral investment agreements, that maybe there was going to be some way to strike a quote-unquote grand bargain between China and America. At this point, Nobody really expects that grand bargain. I think the reality is set in, which is that there is just a lot of mutual suspicion. So that's why I think expectations are quite low. And basically, what they're trying to avoid is having a total breakdown.

4:19Rosie Blau:So what might they actually achieve now then?

4:22Simon Rabinovitch:So the focus of the summit really is going to be on trade, on economic issues. The Chinese are very likely to announce some big purchase agreements. They've talked about buying the three Bs from America, Boeings, beef and beans, soybeans. On the American side, they want trade to be more balanced. Donald Trump's goal, one of his big goals, is to reduce America's trade deficit. So there's talk about creating something called a board of trade, which would basically look at what goods can flow between the countries with relatively low tariffs. Can they somehow bring about managed trade to engineer a more balanced trading relationship to bring down the Chinese trade surplus.

5:02Simon Rabinovitch:By the way, at the start of the trade war in 2018, China ran a roughly$450 billion trade surplus against America. These days, it's about$200 billion. So as far as Donald Trump is concerned, his tactics have been somewhat successful to date.

5:20Rosie Blau:Simon, the focus may be on trade, but all sorts of other topics are likely to loom. What else can we expect?

5:28Simon Rabinovitch:Well, the big one that the Chinese side are pushing is to bring Taiwan into the discussion. So from China's perspective, they've made it clear to the Americans that the more that America gives on Taiwan, the more that China is willing to give on the economy. So what do they mean by giving on Taiwan? What they would like Donald Trump to come out and say is that America actively opposes Taiwanese independence. For the time being, America's had a very ambiguous policy. At the same time as not offering that kind of vocal support to Taiwan, it's been selling a lot of weapons to Taiwan, which is the way that the island is able to defend itself from a potential attack from China.

6:08Simon Rabinovitch:So China would also like to see America either halting or significantly reducing its arms sales to Taiwan. So one of the things that China will be trying to use this summit for is getting Xi Jinping into a room with Donald Trump and basically trying to make the case that Donald Trump, you can be an architect of global peace if you change America's language, if you change America's stance on Taiwan. From the American perspective, American diplomats and many officials are very concerned that Trump might just do something like that. So they've been very clear to say that Taiwan is not up for negotiation.

6:44Simon Rabinovitch:So there's going to be a big dance back and forth between the two leaders, and then potentially on the American side to interpret or to reinterpret whatever Donald Trump actually does or says on Taiwan.

6:58Rosie Blau:And what about other security issues?

7:01Simon Rabinovitch:Well, the two obvious other security issues, which are actually ongoing zones of conflict right now, are Iran and Russia-Ukraine. So in Russia's case, America has consistently been trying to get China to reign in Russia. So far, though, China has not done that. And I think there's little reason to think that they're about to change their tune on that right now. Iran is more interesting because, first of all, that's a war that America started. China is very content to basically be on the sidelines. America knows that China could do more. China was Iran's biggest economic partner prior to the war, buying 90 % of Iranian oil, the biggest foreign investor into Iran.

7:42Simon Rabinovitch:And so America would like China to use some of its heft to get Iran at the negotiating table, make more compromises, move more quickly to reopen the Strait of Hormuz. From the Chinese part, they do not want to get entangled in this conflict. So we'll see after this meeting whether China, in its very quiet, very diplomatic way behind the scenes, does put a bit more pressure on Iran to bring this to an end, to reopen the Strait.

8:09Rosie Blau:Simon, you've outlined a laundry list of thorny topics, it seems like the best case scenario for this week's summit might simply be that it happens, that things are stable.

8:22Simon Rabinovitch:Well, I mean, the best case scenario is that you do get some kind of strong agreement on economic ties. Nobody expects that tariffs will be removed, but at least certainty that they're not going to go up again. Some kind of mutual disarmament on export controls, movement on Iran and Russia. But you're absolutely right, the simple fact that the meeting is taking place, that Xi Jinping and Donald Trump are talking, that is important in and of itself. Remember, this is the first time that an American leader has visited China in nearly one decade. It's a crazy, crazy situation for the world to be in, to have that lack of dialogue.

8:58Simon Rabinovitch:The expectation is that the leaders will meet three more times this year. Xi Jinping will visit America probably in August or September for a bilateral meeting. They then will meet on the sidelines of APEC in China and G20 in America. And so the state of the relationship is going to hinge to a great degree on this meeting starting off on a positive note and hopefully building up momentum for the next few meetings over the course of the year. So this is a really, really important step forward. And let's see what comes out of the next two days.

9:32Rosie Blau:Simon, thank you very much.

9:34Simon Rabinovitch:Thank you, Rosie.

9:38Rosie Blau:And if you want to hear more on what to expect from this summit, you can listen to the current episode of Checks and Balance, our weekly US podcast. And on next week's episode of Drum Tower, our China podcast, we'll be analysing how the Great Meeting went.

10:01I'd like to buy the world a home And furnish it with love In America, there have been few business rivalries as fierce and long-lasting as that of Coca-Cola and Pepsi. Shira Aviona writes about business for The Economist. For more than a century, the pair have fought it out for dominance of the fizzy drinks market. Keep it company. Coca-Cola says it's the real thing. But Pepsi-Cola believes that when it comes to colas, The only real thing is taste. That's why the Pepsi Challenge has been asking thousands of people across the country to let their own taste decide. They've used advertisements, publicity stunts, but today, one of those two soft drinks giants has begun to lose its fizz.

10:52Ooh, do go on. Tell me more about this fizzy rivalry. So a few years ago, the value of the two rival businesses, Coca-Cola and Pepsi, began to diverge. Coca-Cola has been doing pretty well, and Pepsi has been struggling. For a while, it even prompted fears that Dr. Pepper might knock Pepsi off its spot as the U.S.'s second largest producer of soft drinks. So before we get into how the gap is opening, tell me what the market share looks like at the moment. The state of play today is that all of Coca-Cola's brands together account for about 17 % of the American soft drink market, and Pepsi's just 11%.

11:32But if you look at their market value, it tells an even starker story. So since the start of 2023, Coca-Cola's market capitalization has risen about 20%. At the same time, Pepsi's has slumped by 15%. And why is that? One key thing to understand is that Coke and Pepsi have become quite different businesses from one another. So in addition to producing drinks, Pepsi actually makes more than half of its revenues from packaged food because it owns Frito-Lay and sells things like Lay's chips and Quaker oats. And like many other food companies in the kind of post-pandemic period, as they experienced the rising cost of inputs, they raised prices on many packaged foods well above the average of its competitors, but also above food inflation as a whole.

12:21And shoppers in response fled. So that explains the gap that essentially Pepsi becoming a different kind of business and one big part of that business has gone south? Well, there's actually more to it. So another thing that has really hurt Pepsi is that as of late, consumers have become very concerned about ultra-processed food in particular. And more recently, as we've seen a boom in the use of weight loss drugs, that has also been starting to affect both food and soda consumptions. So we know, for example, that Americans who are taking GLP-1s seem to reduce their purchases of soft drinks by about 7%.

13:01But the kind of health-conscious consumer isn't stopping buying soda totally. In fact, they seem to prefer sugar-free soda, and that's yet another area in which Coca-Cola leads Pepsi. So in diet drinks, for example, Americans are guzzling about two and a half times more Diet Coke than Diet Pepsi. But Coke has also been much better than Pepsi at kind of taking advantage of figuring out what drinks health conscious consumers might want to buy. So they were much earlier, for example, to selling protein shakes. And so what is Pepsi doing to catch up? It seems to be losing out on a number of fronts here.

13:43Last September, Pepsi got a letter from Elliott Management, a notable activist investor, demanding that they take all sorts of steps to transform their business. And thus far, Pepsi has been taking the hint. So they are trying to slim down their portfolio of products. They've agreed to lower prices, and they're trying to streamline their manufacturing. And there have been early signs that the turnaround is working. So in the first quarter of 2026, they reported that operating profits were up 24 % over last year, which is actually higher than what Coca-Cola reported for the same period. They've managed to bat away Dr.

14:23Pepper and have retained their number two spot for now. And last year, they acquired a popular healthy soda brand, Poppy, for$2 billion, which is helping to boost sales. So a comeback is mounting. And what that means for Pepsi versus Coke is that the battle is going to continue. Shira, thanks very much for your time. Thank you so much, Jason.

15:01The Russian pavilion at the 61st edition of the Venice Biennale was supposed to be a party.