With help from Gavin Bade, Camille Gijs and Sarah Anne Aarup

— China’s Xi Jinping stressed the importance of closer ties with Washington during a meeting with an American delegation on Monday, in the latest signal both countries are moving forward with a presidents-level meeting at next month’s APEC summit.

— Sens. Ron Wyden (D-Ore.) and Mike Crapo (R-Idaho) wrote a letter to U.S. Trade Representative Katherine Tai urging the agency to vow retaliation if Canada moves forward with its proposed 3 percent digital service tax.

— USTR could announce new agreements over portions of the trade pillar of the Indo-Pacific Economic Framework as soon as next month, while thornier disputes aren’t expected to be resolved until 2024, per an Indonesian government readout and persons familiar.

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APEC EXPECTATIONS MOUNT: Senate Majority Leader Chuck Schumer stressed the need for closer ties between the United States and China but urged the country to level the playing field for American firms during a rare meeting between U.S. lawmakers and Chinese paramount leader Xi Jinping on Monday.

Schumer is leading a six senator delegation — three Democrat and three Republican — for a visit this week to China, South Korea and Japan with the goal of advancing American interests in the region, including maintaining U.S. leadership in advanced technologies.

The New York Democrat said he spoke candidly with the Chinese leader during the 80-minute meeting. The delegation also held talks with other senior officials including Foreign Minister Wang Yi and Commerce Minister Wang Wentao.

Xi called for closer ties, and said the United States and China share “the most important bilateral relations in the world” and that the stability of the world’s largest economies would determine the future of destiny and mankind, according to the Chinese Foreign Ministry.

The meeting, held at the Great Hall of the People in Beijing, marks the strongest signal yet that both parties are moving forward with efforts to arrange a meeting between President Joe Biden and his Chinese counterpart, potentially at the APEC summit in San Francisco next month.

“We made clear to President Xi that America wants fairness and stability. At the foundation of the relationship must be a level playing field for American businesses and workers, as well as responsible competition,” Schumer told a press briefing after the meeting, signaling persisting disputes even as both countries call for stronger engagement.

In another potential signal of rising cooperation, China strengthened the country’s statement condemning attacks in Israel and the Gaza Strip following pressure from Schumer.

Follow-up? Senate Finance ranking member Sen. Mike Crapo (Idaho), the top Republican on the trip, said the delegation would raise concerns over market access on behalf of Micron Technology, per Bloomberg.

Domestic tension mounts: The visit from the bipartisan delegation faces backlash from some GOP lawmakers who object to the recent string of high-level engagement from U.S. officials, underscoring deep divisions within the Republican party.

Florida Republican Sen. Rick Scott introduced a bill to end taxpayer-funded travel to China last Thursday in a pointed rebuke, while Sen. Marco Rubio (R-Fla.) shared a video cautioning the delegation not to accommodate China.

And in the region: The Bureau of Industry and Security is expected to roll out long-awaited updates to export-control measures that could further clamp down on China’s access to chip-making tools this month. At the same time, Xi is expected to travel to Vietnam to showcase the countries’ close ties despite Biden’s recent visit, per The Wall Street Journal.

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EXCLUSIVE — TRADE FIGHT ON TAP: Sens. Ron Wyden (D-Ore.) and Crapo are urging USTR Katherine Tai to pledge to retaliate if Canada moves forward with its digital service tax on American tech giants that is slated to come into force next year, according to a letter dated Oct. 10 and obtained by Morning Trade.

“We appreciate you previously noting that ‘[i]f Canada adopts a DST, USTR would examine all options,’” the lawmakers said, referencing comments USTR made in February 2022 vowing to consider retaliatory options in response to Canada’s proposed digital service tax.

“Canada’s political leadership has not been dissuaded. You must now make clear that your office will immediately respond using available trade tools upon Canada’s enactment of any DST. When you take these steps, you do so with our full support.”

Reminder: The Canadian government is planning to impose a 3 percent digital service tax on Jan. 1, 2024, despite most of the 140 economies participating in an effort led by the Organization for Economic Cooperation and Development agreeing to a one-year extension of a moratorium on similar digital services taxes through the end of next year.

The revenue tax would affect large technology companies like Meta, including corporations with online marketplaces like Walmart and Amazon.

“We must not allow foreign governments to target U.S. companies and the Americans they employ simply because their hard work and innovation has led them to becoming global leaders in this critical sector,” the lawmakers said, referencing data from the Bureau of Economic Analysis.

Katherine Cuplinskas, a representative of the Canadian government, pushed back against the letter in a statement to Morning Trade, which said “Canada’s priority and preference has always been a multilateral agreement.”

“Canada strongly supports international efforts to end the corporate tax race to the bottom and to ensure that all corporations, including the world’s largest corporations, pay their fair share. The Canadian government has been clear for several years that it would move forward with its own Digital Services Tax if a global agreement is not reached,” Cuplinskas added.

Congressional backlash builds: Eighteen Democrats and 23 Republican lawmakers signed a House letter last month warning that Canada’s digital services tax could damage bilateral relations between the two North American partners.

IPEF TRADE TALKS UNDERWAY: USTR is finalizing several portions of the IPEF trade pillar which could be announced next month, while progress on thornier disputes over critical minerals and the digital economy is not expected to make significant headway until 2024, per sources familiar with negotiations, and an Indonesian government readout.

“The United States is targeting several clusters in the IPEF Pillar I to be completed by November 2023. So far, IPEF member countries have expressed support for technical assistance projects, investor forums, upscaling skills, networking and capacity building as a form of real benefits that can be achieved together quickly,” per a translation of the readout, which added that USTR Katherine Tai would focus on the remaining clusters next year.

Airlangga Hartarto, coordinating minister for economic affairs of Indonesia, emphasized the importance of discussion over critical minerals cooperation and that he hopes “this can be discussed at the 6th round of IPEF negotiations in Kuala Lumpur, Malaysia.”

Quick reminder: Tai hosted a virtual trade ministerial meeting last week ahead of the sixth IPEF negotiating round slated for Oct. 15-24 where the 14 countries are expected to make headway on the remaining trade, clean economy and fair economy pillars.

The trade pillar is expected to cover legally binding commitments over contentious disputes, which could make agreements more difficult to reach compared to the Commerce-led initiatives.

Notably, agreements over critical minerals and digital priorities are not expected to be finalized by the end of next month, per two persons familiar with negotiations who were granted anonymity because they are not authorized to speak on record.

EU, U.S. PUSH BACK DEADLINE FOR REACHING GREEN STEEL DEAL TO JANUARY: Brussels and Washington are pushing back a self-imposed end-of-October deadline for reaching a green steel and aluminum deal to January, three EU trade diplomats told Morning Trade.

This comes as the United States and the European Union scramble to come up with concrete deliverables for a transatlantic summit Oct. 20 in Washington.

Not only reporters procrastinate. The Biden administration and the European Commission are cooking up a political statement that promises to land an agreement by Jan. 1 that would lay to rest the possibility of reimposing Trump-era steel and aluminum tariffs.

Way forward: EU countries approved on Monday a so-called non-binding instrument(NBI) that would allow the Commission to negotiate the joint statement with the United States on the way forward for the green steel agreement. This interim agreement would allow both sides to save face and to work out a political outline that would then be ironed out at the technical level.

EXCLUSIVE — WHITE LEAVING USTR: Deputy U.S. Trade Representative Jayme White is stepping down from his position at the end of the month, a source familiar told Morning Trade, after spending about two years at the agency.

At USTR, White covered Europe and the Western Hemisphere, spearheading the agency’s enforcement of the labor provisions of the U.S.-Mexico-Canada Agreement, which he helped shape as a Senate staffer.

Before being confirmed to his USTR post in 2021, White worked on trade policy in Congress for more than 20 years. He joined the staff of Sen. Ron Wyden (D-Ore.) in 2009 and had been the top trade and competitiveness adviser for the Senate Finance Committee since 2014, when Wyden took the committee gavel.

White informed Ambassador Katherine Tai of his decision last week and his last day at USTR is slated to be on or around Nov. 1. He plans to retire from government service and write a book, but hasn’t finalized employment plans beyond that, the source said.

— The Biden administration has a core dilemma when it comes to TikTok: how much to separate the U.S. from Chinese tech companies that are deeply intertwined into American lifestyles but present national security risks, reports Gavin Bade.

— Ukraine hasn’t excluded Chinese telecoms suppliers Huawei and ZTE from providing equipment to rebuild infrastructure damaged by Russia’s attacks, the country’s deputy digital minister told POLITICO, per Antoaneta Roussi.

— Officials from the G7 forum of leading democracies agreed on a draft plan Monday to oversee the most advanced and riskiest forms of artificial intelligence, per Clothilde Goujard.

— California Gov. Gavin Newsom on Saturday signed a bill to require oil companies to fund well closures and vetoed another that would have diluted the state’s authority over oil refineries, Wes Venteicher and Blanca Begert report.

— The Biden administration is working to fulfill Israel’s request to urgently transfer weapons to Tel Aviv, Lara Seligman reports.

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