Outcome of the Trump Xi meeting
Presidents Trump and Xi met in South Korea this week to try to agree on a number of issues, primarily trade. Not surprisingly, Trump said the meeting with Xi was a big success and claimed that the meeting was a 12 on a scale 1-10. Trump said he had agreed with Xi Jinping to trim tariffs on China in exchange for Beijing cracking down on the illicit fentanyl trade, resuming U.S. soybean purchases and keeping rare earths exports flowing.
Trump’s face-to-face talks with Xi, their first since 2019, marked the finale of a whirlwind Asia trip on which Trump also touted trade breakthroughs with South Korea, Japan and Southeast Asian nations. The deal also included a U.S. pledge to delay for a year a new measure, strongly opposed by China, to bar thousands of Chinese firms from receiving U.S. technology if they are part-owned by a sanctioned company.
Trump said tariffs on Chinese imports would be cut to 47% from 57%, by halving to 10% the rate of tariffs related to trade in fentanyl precursor drugs. Xi will work to stop the flow of fentanyl, a deadly synthetic opioid that is the leading cause of American overdose deaths.
China agreed to pause export controls unveiled this month on rare earths, elements with vital roles in cars, planes and weapons that have become Beijing’s most potent source of leverage in its trade war with the U.S. and the rest of the world. The U.S. just can’t push too hard any longer as they are totally dependent on these metals and it will take time to change that dependency.
China agreed to buy 12 million metric tons of U.S. soybeans through January, and to purchase 25 million tons annually for the next three years. This is welcome news for the U.S. farmers and the agricultural sector, a core Trump constituency.
Also, Trump mentioned that China had approved an agreement to bring TikTok under U.S.-controlled ownership, and he expected it to move forward in coming months. China also agreed to purchase oil and gas from the U.S. Washington, meanwhile, will suspend for one-year new Entity List restrictions that make it harder for Chinese firms to use affiliates to buy off-limits technology, as well as suspending measures targeting China’s maritime logistics and shipbuilding sector.
It seems that the agreement offered a one-year reprieve from tensions, but it is worth remembering that China failed to meet its purchase agreements under the Phase 1 trade deal signed during Trump’s first term, so the question is can China be trusted? It seems that the countries have entered a temporary period of détente rather than a breakthrough in a trade war.
The countries agreed to a framework to avoid 100% U.S. tariffs on its goods and defer China’s export curbs on rare earths. They also agreed to pause tit-for-tat port fees on shipping, designed to thwart dominance in shipbuilding, ocean freight and logistics.
Trump said he would travel to China in April before he receives Xi in the United States. Chinese state media portrayed the meeting as a triumph of Xi’s policymaking. The agreement broadly returns ties to their status before Trump’s “Liberation Day” offensive in April triggered tit-for-tat escalation and leaves only Brazil and India facing higher tariffs among major U.S. trading partners. Minutes before starting the meeting, Trump ordered the U.S. military to resume testing nuclear weapons after a gap of 33 years, pointing to the growing arsenals of Russia and China. This shows that the U.S. felt it must come up with something to show strength.
Otherwise, the conclusion from the meeting is basically that China has the control and power over the U.S. economy as the U.S. is completely dependent on rare earth minerals. Until the U.S. has other options than relying on China, they cannot push China too hard economically, and it seems that they are taking the path of military strength to try to level-set the situation. The winner from the meeting was clearly China, but the truce is good for both countries and the global economy.