Former President Donald Trump and Chinese President Xi Jinping Artists’ depiction of Chinese Pres. Additionally, the two leaders will likely officially meet at Gimhae International Airport in Busan, South Korea. This summit comes after a tumultuous period of escalating tariffs and trade tensions between the two nations, raising hopes for a potential resolution to ongoing disputes. Both leaders seem to be heading into this round of negotiations with pretty obvious positioning, looking to filibuster their own national interests.
In February, Trump declared a new 10% tariff on all imports from China. This decision expands his administration’s previous tariffs that are already in place. This change was intended to make it even more difficult for U.S. companies to maintain any connection with Chinese manufacturing. The exemptions doled out to select products undercut this approach, unintentionally emboldening Beijing’s position in the talks.
Once tariffs reached a certain height, the financial picture became much less clear. America’s highest ever tariffs reached a staggering 145%, with China’s retaliatory tariffs at 125%. This tit-for-tat escalation caused major uncertainty within the manufacturing and business community, making it difficult to find a cohesive road to a trade agreement.
Even with all of the increased back-and-forth, recent actions indicate that both parties are moving toward striking a deal. In June, the two countries signed a brittle peace deal, pledging to continue to talk to each other to come to an end of hostilities. Scott Bessent, U.S. Treasury Secretary, commented on this situation, indicating that he did not foresee the implementation of a 100% levy Trump had previously threatened.
The context for the meeting today is a swirling environment of strategic moves and counter-moves. And as part of a broader economic aggression, China has recently launched an anti-monopoly probe into Nvidia. Trump preempted that notion by threatening to place an even larger 34% tariff on “Liberation Day.” This proves just how tenuous these neverending negotiations really are.
Xi Jinping will be entering those discussions on the front foot. His main objective, though, is to get relief from the restrictions on chip sales to China. The U.S. tech curbs have sparked fears that they will drag on China’s technological development. Analysts cautioned that blocking access to rare earth elements would have dire ramifications. This action could freeze productive, dynamic industries that are the lifeblood of both countries’ economies.
China’s long-term strategy seems aimed at developing industries that are increasingly self-sufficient, requiring less Western technology and resources. This change reflects that Beijing is playing a long game with its economic policies. As such, we could be on the precipice of profound changes in the dynamics of global trade.
No matter how difficult the road in front of us may be, both leaders understand just how key dialogue is. Leaders on both sides have emphasized the need to focus on their localized concerns first. Bessent hit on this theme in his comments previewing the day’s discussions to come.
Ahead of this pivotal meeting, T4America reached out to experts on the ground to get their take on what will happen. UTS‘ Prof Tim Harcourt, one of the architects behind this meeting, proclaims, “This gathering will reset globalisation.” It signifies the new starting point in this post-Covid world. This point of view is important, as it highlights the broader impact of the talks aside from just U.S.-China relations. It could point to a broader change in global trade architectures.