US-China trade spat, Iran tensions to dominate weighty G20

The trade battle between the US and China, and fears that spiralling tensions with Iran could erupt into conflict are poised to dominate a high-stakes G20 summit from Friday.

With hotspots North Korea and Venezuela and a slowing world economy also high on the agenda, the two-day gathering of leaders from the world's group of 20 leading nations in Osaka, Japan, could be one of the most pivotal in years, analysts say.

Trump last week sparked hopes for a detente in the long-running trade war when he said he would hold "extended" talks with Xi after a "very good telephone conversation".

For his part, Xi told Trump that "China and the US will both gain by co-operating and lose by fighting", according to Chinese state media.

The two sides were close to a deal when talks broke down abruptly last month and markets are hoping the leaders' first face-to-face talks since December, when they met at the last G20 in Argentina, can break the deadlock.

Trump has hit $200 billion of Chinese imports with levies and has threatened to impose them on an additional $300 billion, which would hurt China's already slowing economy and spread the gloom worldwide.

Observers said a decisive breakthrough was possible at the talks, which are expected on Saturday, but was not the most likely scenario given the complexity of the issues.

"President Trump likes deals, so he might agree to something," noted Matthew Goodman, an economics expert at the US-based Center for Strategic and International Studies.

"More likely is that they will agree to a truce and to restart talks and... try to come to some sort of deal within three months," added Goodman.

Trump could also threaten to raise tariffs to 40 percent if talks fail, he warned, adding: "It's not going to solve the immediate problems."