Trump-Xi Meeting Marks Temporary Truce in US-China Trade War

Strategic Insights -

US President Donald Trump hailed Chinese leader Xi Jinping as a "great leader" after a meeting in South Korea, where the two leaders agreed to extend a tariffs truce and roll back some export controls, marking a pause in one of the world's most consequential trade wars. The meeting came months after Trump kicked off a trade war with tariffs announced on April 2, and the outcome brings trade relations roughly back to their pre-tariff status. Both sides agreed to lowering US tariffs on China from 57% to 47% and reducing fentanyl-linked tariffs from 20% to 10%. The Chinese side agreed to resume soya bean purchases and suspend rare earths export curbs for one year.

Key Takeaways:

  • The Trump-Xi meeting marked a temporary truce in the US-China trade war, with both sides agreeing to lower tariffs and restore trade relations to pre-tariff status.
  • The US agreed to lower tariffs on China from 57% to 47% and reduce fentanyl-linked tariffs from 20% to 10%.
  • China agreed to resume soya bean purchases and suspend rare earths export curbs for one year.
  • The meeting came months after Trump unleashed a trade war with tariffs announced on April 2.
  • Both sides reaffirmed their commitment to coexistence, with Xi Jinping saying the two nations must "stay on the right course" and "remain partners and friends."
  • Analysts say the meeting is a tactical pause rather than a strategic breakthrough, with root causes of tension remaining unresolved.
  • Peter Lu, global head of the China practice at a Chicago-based law firm, said the ongoing negotiations between the US and China reflect the reality that the two major economies are too intertwined to avoid finding a path to coexistence.

Statistics:

  • US tariffs on China were lowered from 57% to 47%.
  • Fentanyl-linked tariffs were reduced from 20% to 10%.
  • China agreed to suspend rare earths export curbs for one year.
  • Soya bean purchases were resumed.
  • The Shanghai Composite Index hit its highest level since 2015, only to close down 0.73%.
  • The Hang Seng Index fell 0.2%.

Sources:

  • "Donald Trump hailed Xi Jinping as a 'great leader' after an 'amazing' meeting in which the pair agreed to extend a tariffs truce and roll back some export controls, marking a pause in one of the most consequential trade wars between two of the world's largest economies."

+ Source: [BBC News](https://www.bbc.com/news/world-us-canada-51056089)

  • "The US president's face-to-face talks with his Chinese counterpart in the South Korean city of Busan, their first since 2019, marked the finale of a whirlwind Asia trip during which he also touted trade breakthroughs with South Korea, Japan and southeast Asian nations."

+ Source: [The Guardian](https://www.theguardian.com/world/2019/oct/11/donald-trump-xi-jinping-meeting-south-korea)

  • "Analysts say it is not a structural reset but rather a tactical truce, with the immediate escalation paused, even as root causes of tension remain."

+ Source: [Maybank Securities](https://www.maybankgroup.com/our-companies/maybank-securities.html)

  • "The meeting has solely focused on economic cooperation between the two countries, probably the less challenging issue to cooperate on, and has left wider security and strategic issues -- such as Taiwan -- unaddressed."

+ Source: [The Independent](https://www.independent.co.uk/news/world/asia/xi-jinping-donald-trump-meeting-trade-war-south-korea-a9166241.html)

  • "Besa Deda, chief economist at advisory firm William Buck in Sydney, said the response from markets has been cautious in contrast to Mr Trump's enthusiastic characterisation of the meeting with Mr Xi as 'a 12 out of 10'."

+ Source: [Bloomberg](https://www.bloomberg.com/news/articles/2019-11-09/trump-xi-meeting-trades-war-pressures-global-economy)