US-China Tensions Ease as Trump and Xi Set to Meet Amid Modest Expectations for Comprehensive Deal

Strategic Insights -

US President Donald Trump and Chinese leader Xi Jinping are set to meet for the first time since 2019, amid hopes of a deal to lower the temperature of their fierce rivalry. Although expectations are modest for how far any agreement will go to resolve the myriad points of contention between the world's two largest economies, the meeting marks a significant step towards de-escalation. However, experts warn that the structural contradictions between China and the US have not been resolved, and that the relationship between the superpowers is likely to remain tense in the future.

Key Takeaways:

  • The contours of an agreement have emerged, including China deferring restrictions on rare earths, increasing purchases of US-grown soya beans, and enhancing cooperation to halt the flow of chemicals used to manufacture fentanyl.
  • A deal along these lines would leave intact a wide array of tariffs, sanctions, and export controls that hinder trade and business between the sides.
  • US-China trade has declined sharply since Trump re-entered the White House, with China's exports to the US falling 27 percent in September and China's imports of US goods declining 16 percent.
  • Experts predict continuing friction and "even worse" relations between the superpowers in the future, with China's strength increasing and surpassing that of the US in the future.
  • A fundamental de-escalation is unlikely given the political environment in the US, according to Shan Guo, a partner with Shanghai-based Hutong Research.
  • Washington and Beijing could put aside their differences for longer than past trade truces, with reduced downside risks in US-China relations for at least a year, or perhaps even longer.

Statistics:

  • US duty on Chinese goods: over 55 percent
  • China's average levy on US products: about 32 percent
  • Average US duty on Chinese goods since Washington and Beijing reached a partial truce: more than 55 percent
  • China's average levy on US products since Washington and Beijing reached a partial truce: about 32 percent
  • US blacklisted hundreds of Chinese firms deemed to pose national security risks: yes
  • China has added dozens of US companies to its "unreliable entity" list: yes
  • China's exports to the US fell 27 percent in September: yes
  • China's imports of US goods declined 16 percent: yes

Sources:

  • Treasury Secretary Scott Bessent
  • Hinrich Foundation head of trade policy Deborah Elms
  • Chongyang Institute for Financial Studies dean Wang Wen
  • Hutong Research partner Shan Guo
  • Georgetown University professor Dennis Wilder