Trump and Xi set for tense South Korea meeting — Key issues from tariffs, Rare Earths to Taiwan explained

Ahead of Thursday’s long-awaited meeting between Donald Trump and Xi Jinping — their first since Trump’s return to office — officials from both sides have been finalising the framework of a trade deal that could end months of global economic disruption caused by the US–China trade war.

The two leaders last met in 2019. Since then, tensions over Ukraine, China’s rapid technological rise and deepening trade imbalances have further strained ties between the two superpowers.

Thursday’s meeting on the sidelines of the Asia-Pacific Economic Cooperation summit in South Korea is seen as a chance to reset relations.

“I think we’re going to have a great meeting with President Xi of China, and a lot of problems are going to be solved,” Trump told reporters aboard Air Force One on Wednesday.

Xi Jinping’s moment to stand as an equal

For Chinese President Xi Jinping, the long-anticipated meeting with Donald Trump on Thursday is far more than another round of diplomatic theatre. It is a stage upon which Beijing hopes to project a message it has long nurtured — that China now stands as an equal to the United States on the global stage.

Trump’s renewed trade war against China has tested Xi’s drive for innovation and self-reliance, yet paradoxically it has also strengthened Beijing’s resolve. While the United States has sought to weaponise tariffs, technology restrictions, and supply-chain disruptions to curb China’s ascent, these same pressures have compelled China to accelerate its strategic independence.

Unlike the first Trump administration, which caught Beijing off-guard with its trade offensives, the Chinese leadership now appears composed and prepared. Analysts in Beijing describe the upcoming encounter as a moment when Xi will walk into the room not as a supplicant, but as a counterpart — one ready to negotiate, but not to yield.

How did the new trade tensions unfold? A look at tariff timeline

The tensions between Washington and Beijing reignited soon after Trump returned to office, with the White House reinstating broad tariffs on Chinese goods that had been relaxed during the intervening administration.

Initially framed as an effort to protect American industry and counter alleged Chinese trade abuses, the measures swiftly escalated into a new round of economic brinkmanship. The United States currently levies tariffs averaging around 50% on Chinese imports, with the president threatening to double those duties if talks fail to produce a breakthrough.

China has countered by broadening its own export restrictions, particularly in industries vital to the US economy — including electronics, critical minerals, and manufacturing components.

In recent weeks, tensions flared again when the US imposed rules limiting China’s access to advanced technology and shipping networks, prompting Beijing to announce sweeping export controls on rare earth minerals, materials critical to global manufacturing.

As both sides exchanged blows, global markets reacted nervously. Yet behind the scenes, negotiators sought to de-escalate. Malaysia hosted eleventh-hour trade discussions last weekend, where top officials from both nations signalled tentative progress.

Although no agreement was reached, both capitals have since sought to lower the rhetoric. “Beijing and Washington are testing the limits of each other’s leverage,” said a senior trade expert based in Singapore. “Neither side wants to appear weak before domestic audiences, but both recognise the economic cost of prolonged confrontation.”

Why are rare earths at the heart of the dispute?

At the centre of this power struggle lies control over rare earth minerals — 17 elements essential for everything from smartphones to fighter jets.

China commands more than 80% of global rare earth processing, a position that gives it immense strategic leverage. When Washington tightened its technology export rules, Beijing responded by expanding its rare earth export controls, a move that sent shockwaves through global markets.

The United States threatened to counter with 100% tariffs on Chinese goods. That escalation has since paused, following weekend talks in Malaysia.

“China imposed those controls to coerce the US not to put sweeping sanctions on China, but rather to limit its sanctions to a very few national security fields,” said Shen Dingli, a Shanghai-based foreign affairs analyst.

China’s Rare Earths Dominance — By the Numbers

• 80%+ of global rare earth refining and processing done in China
• 60% of US imports of rare earth compounds sourced from China
• 17 elements make up the “rare earth” group critical to modern technology
• 264% increase in Chinese export value of rare earths since 2018
• 100% tariffs threatened by the US in response to Beijing’s export restrictions

What is Beijing’s broader strategy?

Within Beijing, the prevailing view is that China is now resilient enough to face external shocks without capitulating to Western pressure. Officials emphasise self-sufficiency, technological innovation, and trade diversification as central pillars of Xi’s economic doctrine.

The upcoming Five-Year Plan is expected to deepen that trajectory, expanding state-led investment in semiconductor production, renewable energy, and artificial intelligence. By reducing reliance on American technologies and export markets, Beijing seeks to ensure that any future trade sanctions will have limited impact.

“China is very calm in facing all these conflicts and difficulties set up by the United States,” said Wang Wen, dean of the Chongyang Institute for Financial Studies at Renmin University in Beijing. “The United States is still a major partner, however, among China’s landscape, the US is losing its importance.”

The sentiment reflects a broader recalibration in China’s diplomatic posture: engagement, yes — but on Beijing’s terms.

What will Trump and Xi discuss in South Korea?

The meeting in South Korea will take place on the sidelines of a regional summit, marking the first face-to-face encounter between Trump and Xi since 2019. Both sides are expected to discuss a framework for stabilising their economic and technological relationship.

Trump’s administration wants Beijing to roll back its export controls and commit to market access for American firms. Xi, meanwhile, will likely press for a reduction in US tariffs and the easing of export restrictions targeting China’s high-tech sector.

According to analysts, Xi’s delegation views the meeting as an opportunity to reaffirm China’s parity with the United States — not to plead for relief.

Beijing’s top diplomat, Wang Yi, recently underscored that sentiment during a call with US National Security Adviser Marco Rubio, saying: “Xi and Trump were both world-class leaders, who have engaged with each other over a long period and with mutual respect. Upholding the spirit of equality, respect, and mutual benefit,” he added, was essential for “moving the bilateral relationship forward.”

Still, much could depend on the personal chemistry between the two strongmen. Trump’s style of diplomacy — marked by improvisation and theatrical flourishes — often leaves outcomes unpredictable.

Earlier this week in Japan, Trump’s warm exchange with the country’s new conservative prime minister, Sanae Takaishi, underscored how quickly his tone can shift when rapport is established. Whether similar warmth emerges in South Korea remains to be seen.

What are the possible outcomes of US-China talks?

Diplomatic observers outline three potential scenarios.

A symbolic truce: The most likely outcome is a short-term de-escalation, with both sides agreeing to pause new tariffs and export restrictions while continuing dialogue.

A partial breakthrough: Xi and Trump could announce a limited deal — such as easing tariffs in exchange for Chinese concessions on rare earths or intellectual property protection.

A renewed impasse: Should talks falter or either leader deviate from prepared remarks, tensions could flare again, leading to market instability and political fallout.

“From the US side, any tariff or any measures taken (by) the Chinese side has helped President Trump himself to learn the capacity of China is different from eight years ago,” said Wang Yiwei, director of the Institute of International Affairs at Renmin University. “He understands that what is changed — is the US is not the dominant power anymore.”

The stakes for global stability

Beyond trade, the meeting will test whether the world’s two largest economies can coexist without constant confrontation. The outcome will reverberate far beyond South Korea — shaping markets, supply chains, and diplomatic alignments from Tokyo to Brussels.

Whether the two leaders strike a truce or deepen their rivalry, one fact remains: the balance of global power is no longer one-sided. As Xi and Trump prepare to face each other, the world watches not for a victor, but for signs of whether the era of pragmatic coexistence is still possible.