On October 30, US President Donald Trump extended his Asia trip to meet his Chinese counterpart President Xi Jinping, in South Korea. Their goal was to reach an agreement addressing the increasing trade friction between their two countries. This level of high-level engagement is a welcome change from the recent threats and retaliations that have defined this perpetual trade war. The meeting led to concrete steps to de-escalate US-China tensions. Coming after years of antagonistic economic exchanges, this development provides real promise for a more constructive bilateral economic relationship.
At the summit, these are the real challenges that both leaders sought to counter with trade. President Trump had done this earlier this year when he threatened to place 100% tariffs on certain Chinese products. He wanted to use technology sanctions to stop China’s increasing influence in high-tech industries. After the sometimes Stormy Daniels-like discussions, both parties appear to have come to a deal in principle. They agreed to rollback some of these measures making for a friendlier environment.
As negotiations continued between the two countries, China introduced new export controls on rare earth minerals. These minerals are critical for numerous high-tech applications. They are vital for producing electronic devices, clean energy technologies, and our defense systems. The announcement sent shock waves through the US, as many worried about the backlash this would have on American manufacturers that are deeply committed to these resources.
At the same time, the US government announced the inflation figures for September, showing that core inflation had hit 3.0%. Partly due to the persistent economic pressures, this figure is high but entirely tenable in today’s market. And unemployment remained at a 30-year low of 6.3%. This resilience in the labor market transcends brightline tariff lines even as rampant uncertainty over trade persists.
As of October, the US was reporting inflation at a much lower 2.1%. This means that prices are increasing because of many strong demand and supply side factors, but they have not gone nuclear. These latest economic indicators strongly suggest that the US economy is beginning to recover from the earlier in-the-year trade fracas that was weighing it down.
Moving to the Chinese front, let’s start with the government’s first draft of the Five-Year Plan for 2026-2030. The plan reflects the country’s long stated focus on technology, innovation and self-reliance. It aims to support private consumption as a more robust engine of growth while tackling the two-speed state of China’s economy. Economic data continues to paint the picture of a strong export market and a growing high tech industry. Growth in domestic consumption and the housing market remain in the doldrums.
China’s economy is marked by a deep divergence within its own sectors. This foreshadows much harder tasks to come as the nation attempts to grow more equitably. China wants a competitive advantage in world markets through superior technology. International partners are understandably becoming alarmed at its encroaching reach and are increasingly monitoring its activities with public scrutiny.
Internationally, economies are beginning to settle, with growth around the world projected at 3%, near long-run norms. This emerging trend serves as a reminder of just how connected today’s global markets are and how shifts in trade relations can affect economic performance. The recent negotiations between Trump and Xi Jinping may have changed the calculus. Among other implications, they might foster a more predictable trading environment.
As both nations move forward, we are optimistic that continued discussions can produce permanent accords. These agreements need to serve the interests of not just the US and China, but the world economy at large. That balance between cooperation and competition is a delicate one. Future engagements will be essential in determining how well each side leads their increasingly competitive relationship.