Elephant in the room

The eyes of the world are on today’s phone call between Joe Biden and Xi Jinping. It could be their most fraught exchange yet.House Speaker [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( The eyes of the world are on today’s phone call between Joe Biden and Xi Jinping. It could be their most fraught exchange yet. House Speaker Nancy Pelosi’s proposed trip to Taiwan is ratcheting up tensions before the first conversation between the US and Chinese leaders since March. A sitting speaker hasn’t been to the island since 1997, and Beijing has warned of repercussions if the visit goes forward. Key reading: - [Biden Will Speak to Xi on Thursday as US-China Ties Worsen]( - [China Getting ‘Seriously Prepared’ for Pelosi Visit to Taiwan]( - [US Aircraft Carrier Enters South China Sea Amid Taiwan Tensions]( - [Blinken Blasts China’s Support for Russia, Calls Out Xi]( It’s already a difficult juncture for US-China ties — a relationship that’s threatening to stray from strategic competition to open animosity. Xi’s cozy rapport with President Vladimir Putin despite Russia’s war on Ukraine is but one core point of concern for Washington. Taiwan adds another layer of difficulty. Xi needs to retain a revanchist stance toward Taipei, bolstering his nationalist agenda in the months before a leadership meeting where he’s expected to secure a third term in office. For their part, US lawmakers can’t be seen submitting to threats with November midterm elections approaching. A public spat where policy and credibility are on the line is particularly unhelpful now, as both leaders acknowledge there’s a need for dialogue to diffuse the risk of conflict and build consensus — all the more so as the threat of a global economic recession grows. But the spiral of great-power rivalry has its own momentum. What started as a trade war under Donald Trump has widened to become an ideological split that’s pulling the world’s two largest economies further apart. China and the US are both seeking to reduce their mutual dependence by re-configuring supply chains, securing access to advanced technologies and shoring up energy security. That’s a deepening gulf for Xi and Biden to overcome. And surely too much for a simple call to resolve. — [Rebecca Choong Wilkins]( Xi in Hong Kong earlier this month. Photographer: Justin Chin/Bloomberg Click [here]( to follow Bloomberg Politics on Facebook and share this newsletter with others. They can sign up [here](. Global Headlines Potential breakthrough | US Senator Joe Manchin and Majority Leader Chuck Schumer have struck a [deal]( on a tax, energy and climate bill, breaking a deadlock on the Democrats’ long-sought legislation to enact major parts of Biden’s agenda. The plan would generate an estimated $739 billion in revenue, spend $433 billion and reduce deficits by $300 billion over a decade, much less than the administration planned before Manchin’s opposition. - The Senate [passed]( legislation that includes $52 billion in grants and incentives for US semiconductor manufacturing, an industry that has steadily lost ground to foreign competitors in recent years. Call to arms | The UK’s most high-profile labor union boss called for a general [strike]( if Liz Truss, the frontrunner to become prime minister, follows through on her plans to curb union power. Mick Lynch, who heads the rail, maritime and transport union, said Truss’s proposals to force a minimum level of service during strikes and make it harder for workers to walk out would prompt “an enormous response” from labor groups. - Many of the ramifications of Brexit are only beginning to be [felt](, presenting the next UK prime minister with a serious challenge. Bloomberg Bloomberg Australia’s Indigenous people, the nation’s poorest and most disadvantaged group, are making little ground in their [struggle]( for equality. Four of nine indicators in the government’s survey tracking their social and economic well-being have worsened, including children’s schooling, adults in prison and suicides. Prisoner swap | US Secretary of State Antony Blinken said he intends to speak with Russian Foreign Minister Sergei Lavrov about a “substantial” deal to free imprisoned Americans Brittney Griner and Paul Whelan, with a source saying the US would [swap]( them for imprisoned Russian arms dealer Viktor Bout. The Biden administration has declined to comment on whether it would agree to release Bout, who is serving a 25-year prison sentence in the US. - Russia’s economic slide continued in June but didn’t take a turn for the worse, as fresh data underscored the [uncertainty]( about the longer-term impact of sanctions. Best of Bloomberg Opinion - [Have Putin’s Ukraine Goals Shrunk or Grown?: Leonid Bershidsky]( - [US Should Challenge Tunisian Leader’s Power Grab: Bobby Ghosh]( - [The Threats From China and Russia Are Digital: Julianna Goldman]( Premier pick | Italy’s rightist coalition [agreed]( on which party will put forward the next prime minister after snap Sept. 25 elections, a decision that favors Giorgia Meloni, leader of the far-right Brothers of Italy party. Meloni, who has expressed views opposing immigration and LGBTQ rights and admiration for Hungarian leader Viktor Orban, heads Italy’s most popular party. Explainers you can use - [The Spiraling Debt Crunch Confronting Poor Nations]( - [Understanding the Unraveling of Tunisia’s Revolution]( - [Designers Want to Fix the Big Ugly Problem With Solar Panels]( Precarious position | Markets in Argentina are braced for more [volatility]( after a report that President Alberto Fernandez is poised to name a new economy minister, the third person to hold the post in less than a month. If the report in the Clarin newspaper is confirmed, Sergio Massa will inherit the job as Argentina grapples with inflation forecast to hit 90% and fails to hit the targets it must meet to comply with a $44 billion IMF program. Bloomberg TV and Radio air Balance of Power with [David Westin]( weekdays from 12 to 1 p.m. ET, with a second hour on Bloomberg Radio from 1 to 2 p.m. ET. You can watch and listen on Bloomberg channels and online [here]( or check out prior episodes and guest clips [here](. News to Note - The United Nations [Human Rights Committee]( called on Hong Kong to repeal its Beijing-imposed sweeping national security law, raising deep concerns about the “overly broad interpretation” and “arbitrary application” of the legislation. - Sri Lanka is keeping in place emergency rule [orders]( set out by President Ranil Wickremesinghe, while police have arrested at least three organizers of the street protests that forced out his predecessor Gotabaya Rajapaksa. - Texas will [ban]( almost all abortions starting Aug. 25, when a dormant 2021 state law takes effect. - North Korean leader Kim Jong Un [threatened]( to “eliminate” South Korea and said he was ready for any battle with the US in a speech to mark the 69th anniversary of the deal that ended fighting in the Korean War. - Hackers are likely using commercial spyware to [breach]( phones belonging to US officials stationed around the world, the chairman of the House intelligence committee said yesterday. - Saudi Arabia’s Crown Prince Mohammed bin Salman is due to start a [visit]( to France today, when he’ll dine with President Emmanuel Macron. And finally ... Xi’s Covid Zero strategy is notorious for its grueling lockdowns. But in the southwestern megacity Chongqing, signs of the policy disrupting daily life are hard to find — infections are very low, masks are rare, clubs are packed and tourism is booming. And in many such cities, it’s business as usual, as border curbs, mass testing drives and lockdowns stop the virus from a cross-country spread. That relative [normalcy]( has enabled Xi to press ahead with his strict plan even as the rest of the world moves on. Friday night at a club in Chongqing. Photographer: Colum Murphy/Bloomberg Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022