Donald Trump and Xi Jinping agree to a trade truce
Though much remains to be resolved in the world’s most important relationship
IT WAS MORE grand bazaar than grand bargain. After months of haggling, bluffing and fist-shaking, America and China appear to have a trade deal. Meeting in a pokey room at a South Korean airbase on October 30th, President Donald Trump and his counterpart, Xi Jinping, finalised the essentials of an agreement. Their apparent truce reduces the risk of another flare-up, for now. It also allows for the two leaders to visit each other’s countries next year. Yet the timing of a final deal remains unclear, as does its durability—Mr Trump suggested it could be renegotiated annually. Whether it resolves more fundamental problems in the two powers’ relationship is another matter entirely.
In their first meeting in six years, the two leaders agreed to roll back many of the moves that each side had made or threatened in recent weeks. Both sides confirmed that China would delay new restrictions on the export of rare earths for a year. This suggests America will not slap an extra 100% tariff on Chinese goods from November 1st, as Mr Trump once threatened. China’s commerce ministry said America would also put off, for a year, reciprocal tariffs due to come into force on November 10th, as well as new export controls on subsidiaries that are at least 50%-owned by blacklisted companies. That would have affected many Chinese firms.
Both sides also confirmed that America would halve a 20% tariff imposed earlier over China’s alleged failure to curb exports of chemicals used to make fentanyl, which has claimed many American lives: Mr Trump said China would do more to help stifle that trade. He also said China had resumed purchases of American soyabeans which it stopped in May in a bid to increase pressure on the White House from American farmers. China said both sides had agreed to expand their farm trade.
“There wasn’t too much left out there," Mr Trump told reporters aboard Air Force One as he left Busan. “We have a deal." He added that he and Mr Xi had discussed Ukraine at length, agreeing to work together on bringing peace there.
It was not immediately clear what a final deal would actually entail. Mr Trump said he did not discuss Taiwan and did not agree to the sale of Nvidia’s state-of-the-art Blackwell AI chips to China. But he said he discussed access to some of the company’s other chips, something he said should be negotiated between China and Nvidia with his government as “referee". In his remarks to reporters, Mr Trump did not mention a deal to transfer the American operations of TikTok, a short-video platform whose parent company is Chinese, to American ownership. China’s commerce ministry said it would work with America to resolve the TikTok issue for good.
Both Mr Trump and Mr Xi struck a positive tone from the meeting’s start. Mr Trump called Mr Xi a “great leader of a great country" and said: “I think we’re going to have a fantastic relationship for a long period of time." Mr Xi acknowledged that: “We do not always see eye to eye with each other". But such friction, he added, was normal between the world’s two leading economies and they should be “friends and partners". Mr Xi also acknowledged Mr Trump’s peace-making efforts in Gaza and in South-East Asia.
The prospect of an agreement has cheered global markets, and in the hours after the Trump-Xi meeting they were calm. It also came as a relief for many companies and foreign governments ensnared in the trade war. Taiwan, the self-governed island that China claims, will be heartened that Mr Trump said it was not discussed. He had said earlier in October that he would discuss the island with Mr Xi; that raised concerns in Taiwan that he might water down America’s commitment to help the island defend itself.
For all the relief, the tentative deal stops well short of ending the trade war. As Mr Trump confirmed, it leaves in place an American tariff rate of 47% on Chinese goods. China’s commitment to delay its rare-earth export controls will not allay anxieties in America and elsewhere about how they will be implemented. And though Mr Trump said a final deal could be signed “pretty soon", his suggestion that it could be renegotiated each year raises the prospect of perpetual instability.
The risk for now is that the current framework deal collapses. Trade talks between the two sides have been through a rollercoaster of temporary truces and dramatic escalations over five rounds of negotiations since May. Those talks have been led by Scott Bessent, America’s treasury secretary, and a Chinese vice-premier, He Lifeng. They negotiated the outlines of the agreement in a two-day pow-wow in Malaysia that ended on October 26th. Yet Messrs Bessent and He have often struggled to agree on what was concluded in earlier rounds of talks; each has appeared surprised by subsequent steps taken by the other. Given the short time frame and the lead negotiators’ relative lack of experience, considerable scope exists for loopholes or differences in interpretation.
If the current agreement does hold, a second question arises. That is whether it will address the deeper structural problems in the relationship. In the trade deal signed in 2020, China committed to buy at least $200bn-worth of additional American goods and services over the following two years. Yet China never met the purchase targets (blaming the start of the pandemic); American officials recently accused it of violating the agreement.
Critics of the new framework deal argue that it focuses too much on near-term issues, such as soyabeans and TikTok, and too little on fundamental problems, China’s industrial policy above all. The two sides may try to build on the deal over the coming months. Yet at an October conclave of the Communist Party leadership, China once again made clear its determination to dominate advanced manufacturing, as well as achieve technological self-reliance. Meanwhile, both sides continue to manoeuvre in a broader geopolitical contest. Before arriving in South Korea, Mr Trump signed a series of deals with Asian countries to boost trade ties and co-operate on supply chains for critical minerals.
A third risk is that an unanticipated crisis in another arena upends the deal. Mutual suspicion colours relations between the two powers. Relations have been rocked before by incidents such as a Chinese spy balloon’s flight over America in 2023. Military tension remains high in the South China Sea and around Taiwan. Just before meeting Mr Xi, Mr Trump said he had ordered a start to testing nuclear weapons on an “equal basis" with Russia and China. A trade deal is a step in the right direction. But stable ground is still far away.
Subscribers can sign up to Drum Tower, our new weekly newsletter, to understand what the world makes of China—and what China makes of the world.
topics
