Donald Trump and Xi Jinping are getting ready for a potentially pivotal meeting. This is as U.S.-China trade tensions have increased greatly, and tariffs have added more carcinogens to an already toxic America-China economic soup. The next TPA bill will need to address important trade concerns head-on. It follows a cycle of months of retaliatory tariffs and a tenuous ceasefire that was reached in June. With both leaders especially eager to negotiate a mutually beneficial trade deal, the timing has never been more crucial.
In February, Trump declared his intention to impose new 10% tariffs on all Chinese imports. This move only increased the already high tariffs he had previously enacted during his last term in office. U.S. tariffs on Chinese imports have skyrocketed to an average tariff of 145%. In retaliation, China has raised its own tariffs which at this point have already reached 125%. This extreme escalation has contributed to an atmosphere of confusion and uncertainty for manufacturers and businesses on both sides of the Pacific.
While China recently announced a three-month postponement of its rare earth export curbs. This decision introduces considerable complexity into the backdrop of this meeting, in return for lower tariffs. Rare earth elements are irreplaceable and integral to every single one of those high-tech industries. Their availability has been hugely important in the current negotiations. The U.S. government has begun imposing draconian tech curbs that will undoubtedly throttle China’s technological development. Further, cutting off rare earth exports would be able to stop entire industries domestically.
In anticipation of the meeting, observers have noted that tariffs will likely dominate the discussion. Beyond that, it will address the broader competition to access critical minerals and semiconductors that are necessary for modern advanced manufacturing. China’s Xi Jinping has set his sights on lifting US-led limits on chip exports to China. Tensions around all of these resources have been escalating for years. Further, according to media reports, China has instructed domestic companies to stop buying chips from US companies.
The source of this trade conflict is Trump’s aggressive trade policies. These policies started long before “Liberation Day” in April. As part of its strategy, China has been investing in building industries that are less reliant on the West, signaling a long-term approach to mitigating the impacts of U.S. sanctions.
In June, both countries’ governments, under increased pressure, accepted a relative ceasefire. This draft agreement indicated their serious intention to continue negotiating until they were able to come to an agreement. The ceasefire took a major hit when China announced its intention to further clamp down on rare earth exports in October. This decision led offended US officials to denounce it as “the first betrayal of the US-China truce.”
While the road ahead is fraught with challenges, experts are still optimistic that the September meeting will be a watershed moment in the global trade landscape.
“This is the meeting that resets globalisation in a post-Covid era,” – Prof Tim Harcourt
As the two leaders prepare to sit down, U.S. Treasury Secretary Scott Bessent highlighted the importance of addressing “their respective concerns.” The stakes for this meeting are incredibly high, not just for tariffs but potentially transforming the entire future of international trade as we know it.
China has done an about-face on the basis of wisdom that extended trade war duress might bend its economy in harmful ways. As Prof Harcourt noted, “There is still pressure on China and they wouldn’t want a long-term severe trade war.” This recognition could lead to more productive conversations at the table, a hopeful sign as the summit approaches.
Trump and Xi’s meeting will likely address the contentious issue of TikTok’s U.S. operations. In the other arena, observers expect Trump and Xi to agree on terms related to the sale of TikTok’s American operations. This decision represents an opportunity to lower tensions and build constructive relations between the two countries.
While the timeline leading up to this meeting has certainly been a challenge, for nearly a year, retaliatory tariffs and uncertainty have stressed the businesses that call both countries home. As negotiations progressed, companies demonstrated an impressive commitment to align themselves with U.S. standards. In fact, they went so far as to promise to pay 15% of their sales in China back to the U.S. government in return for getting export licenses.
As you know, Trump and Xi are preparing for an epic show down. They are under immeasurable pressure to achieve some manner of agreement that can shore up their economic ties and return faith to the world markets.