When Barack Obama and Xi Jinping meet next week in Annenberg, California, the desert air will vibrate with the rhetoric of co-operation. The reality is different. The two most important countries in the world are involved in economic skirmishes that could corrode the institutions through which the global economy functions.

When Mr Xi, who is set to be Chinese president for the next decade, meets the next US president in a few years’ time, the World Trade Organisation, World Bank and the International Monetary Fund could all be in positions of irrelevance. This would be a disaster for the rest of the world’s economies.

The way forward is for the US and China to strike a grand bargain. It would require an exchange of power for purpose. In other words, Washington would give up power in these institutions in return for China taking on greater global leadership to preserve the system’s real purpose – free and fair globalisation. But first they will have to overcome an increasing level of mutual mistrust.