Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
US President Donald Trump and Chinese leader Xi Jinping are scheduled to meet on Thursday at Gimhae International Airport in Busan, South Korea, amid expectations of progress towards a comprehensive trade deal. Officials from both nations indicated a consensus had been reached on addressing mutual concerns, with US Treasury Secretary Scott Bessent suggesting that previously threatened 100% tariffs on Chinese goods might not materialize. The high-stakes meeting, occurring during the Apec summit, aims to ease tensions that have escalated over tit-for-tat tariffs, competition for critical minerals and semiconductors, and the future of the popular Chinese-owned app TikTok.
The Trade War’s Genesis
The planned meeting follows a protracted 10-month period marked by escalating trade hostilities. President Trump initiated the trade war by imposing tariffs on Chinese imports, citing unfair trade practices. These measures, which began in his first term, intensified with new 10% tariffs early in his second term, leading to retaliatory levies from Beijing.
The tariff escalation saw US duties on Chinese goods reach 145%, while Chinese levies climbed to 125%, causing significant uncertainty for manufacturers and importers globally. China, despite expressing openness to dialogue, demonstrated a willingness to absorb economic pain, including targeting American agricultural imports like soybeans, a key vote base for Trump. A fragile truce was eventually agreed upon in June, committing both sides to continued negotiations.
The Battle for Chips
Beyond tariffs, the rivalry between the two economic powers centers on advanced semiconductor chips, crucial for modern technology and China’s ambition to lead in cutting-edge tech. The US, under the Trump administration, has sought to restrict China’s access to these advanced chips, impacting companies like Nvidia, a major chip designer.
In response, Beijing reportedly encouraged domestic firms, including Alibaba and Huawei, to prioritize local manufacturers and launched an anti-monopoly probe into Nvidia. China policy analyst Stefanie Kam suggests these actions underscore Beijing’s long-term strategy to become more self-reliant and resilient in its technological development.
Rare Earths as Leverage
China further leveraged its economic position by tightening controls over rare earth exports in October. These critical minerals are vital for electronics, green energy, and military equipment, with China holding a near-monopoly on their processing. This move, which stunned the White House, served as a stark reminder of America’s dependence on Chinese resources.
Following China’s rare earth announcement, which occurred after President Trump had indicated an agreement on TikTok’s US operations sale, the US pursued alternative supply agreements with countries like Australia, Malaysia, and Japan. These efforts aimed to secure access to essential minerals outside of Chinese control.
Meeting Expectations and Outlook
Analysts anticipate several outcomes from the Trump-Xi meeting, including potential finalization of the TikTok US business sale and relief from chip sale restrictions for China. The day before the talks, Beijing reportedly purchased its first significant soybean cargoes of the season, indicating a gesture of goodwill.
Economist Prof Tim Harcourt noted China’s domestic economic challenges, including unemployment and a property crisis, suggesting that Beijing also seeks to avoid a prolonged trade war. While acknowledging the deep-seated rivalry, experts like Stefanie Kam believe there are “lower-hanging fruits” for agreement, such as China delaying rare earth export curbs in exchange for reduced tariffs.
The meeting represents a pivotal moment in US-China economic relations, offering a chance to “smooth the waters” amidst significant trade and technological competition. While a deal could narrow the risk of future unexpected decisions, analysts caution that any truce between the two global powers may prove temporary given the underlying strategic rivalry.
