In a significant development in U.S.-China relations, President Donald Trump and Chinese leader Xi Jinping held their first meeting in six years, resulting in a temporary agreement to suspend certain tariffs. A very rocky chapter has recently closed. It was characterized by growing trade hostility, tariffs, and countermeasures that disrupted both countries’ economies.
This meeting occurs in the shadow of a trade war, initiated by none other than President Trump himself. In February, he unilaterally decided to add an additional 10% tariff on Chinese goods. China’s supposedly lax enforcement of the flow of precursors for making fentanyl prompted this action. Fentanyl, an extremely potent opioid, is often cited as the key driver of the current opioid epidemic sweeping the United States. In one move, responding to the U.S.’s tariffs on steel and aluminum with their own tariffs, enacting tariffs increased to as high as 145%.
The situation escalated further when the U.S. introduced port fees targeting China-linked vessels in October as part of a broader strategy to restore America’s shipbuilding capabilities. In line with past Washington-Beijing escalatory cycles, Beijing quickly retaliated with countermeasures targeting U.S. interests.
The Trump-Xi meeting was a defining moment, for it signified the beginning of a de-escalation between the growing Sino-American antagonism. After talking with each other, both leaders made commitment to suspend certain tariffs for one year. This suspension is focused on retaliatory tariffs imposed on both sides during the trade war. It is designed to provide businesses with short-term, immediate relief from the current uncertainties of the economy.
China recently announced that from October, it would suspend its rare earth export restrictions for a year. Simultaneously, the U.S. will suspend its own affiliate rule for the six-month period. Although the port fees imposed will not be removed, their suspension for one year represents a step towards reducing friction between the two countries.
For their part, China is undertaking a historic commitment. In return, they will buy at least 25 million metric tons of U.S. soybeans annually over the next three years. In addition to this agreement, China has committed to purchase the equivalent of 12 million metric tons of U.S. soybeans through January. This proposal seeks to provide important relief to American farmers. They have already been devastated by the trade war.
In a good-faith gesture, President Trump repealed a 10% tariff on fentanyl. In exchange, he requested Beijing’s help in combatting the global illegal drug trade. The deal shows the current balance of political power and passion and economic self-interest.
Even still, experts are cautiously optimistic but doubtful that these changes will have lasting repercussions despite this noteworthy agreement. Kurt Campbell noted that “generally, Trump grows impatient with anything beyond the immediate, and it is the Chinese that play for longer term advantage.” This sentiment is not unlike the concerns about whether these temporary measures will actually carry more substantive progress on other deeper trade issues.
Sean Stein emphasized the need for future negotiations to tackle long-standing market access barriers, stating, “We hope that future negotiations will address long-standing market access barriers, help level the playing field for U.S. companies, and bring long-term predictability to the bilateral trade relationship.”
According to some analysts, growing skepticism casts a long shadow over recent, historic negotiations. Eswar Prasad remarked, “It is hard to see what major gains the U.S. has made in the bilateral relationship relative to where things stood before Trump took office.” Similarly, Chuck Schumer asserted that “if anything, things are worse: Prices have gone up and China has agreed to nothing of substance that will improve trade between our nations.”
Against this backdrop of competing, polarized perspectives, Xi Jinping’s speech underscoring opportunity for collaboration between the two countries couldn’t have come at a better time. In his closing remarks during the meeting, he stated that recent twists and turns “offered some lessons for both sides,” emphasizing the need for both countries “focusing on the benefits of cooperation rather than falling into a vicious cycle of mutual retaliation.”
