Politics

Can Trump and Xi’s Trade Deal Heal US, China Economic Wounds? What Businesses Need to Know

Trump and Xi reached a trade deal: US tariffs cut, China buys soybeans. Analysts doubt it solves deeper economic woes.

byEditorial Staff

October 30, 2025, 3:53 PM

A cargo ship loaded with colorful stacked shipping containers docked beside large blue and red cranes.

A large container ship with stacked cargo is being serviced by port cranes. By MDL.

Executive Summary

President Trump and Chinese President Xi Jinping announced a preliminary trade deal, including a 10% reduction in US tariffs on Chinese goods, a delay in China’s rare earth export controls, and increased Chinese purchases of American soybeans.

Analysts suggest the agreement offers some relief for US soybean farmers and reduces tariffs, but it is unlikely to significantly address deeper US economic challenges like slowing job growth, which were exacerbated by Trump’s tariffs.

Despite the trade deal, China continues to grapple with long-standing domestic economic issues such as a property downturn, persistent deflation, and dampened consumer confidence, which experts believe the revised trade terms will not materially shift.

The Story So Far

The preliminary trade deal between President Donald Trump and Chinese President Xi Jinping emerges from a backdrop of significant, pre-existing economic challenges in both nations; the US economy was already weakening with a slowing job market, exacerbated by Trump’s aggressive tariffs, while China continues to grapple with a prolonged property downturn, persistent deflation, and dampened consumer confidence. These deeper, structural issues mean that analysts are skeptical the current agreement will fundamentally resolve the underlying economic problems plaguing either country.

Why This Matters

The preliminary trade agreement between President Donald Trump and Chinese President Xi Jinping offers only limited, immediate relief, such as reduced US tariffs and increased soybean purchases, but analysts are skeptical it will resolve the deeper economic challenges facing both nations. For the US, the deal might provide some reprieve for farmers but doesn’t fully address the broader economic slowdown and job market concerns, while for China, it’s expected to have only a marginal impact on its structural issues like deflation, the property slump, and weak consumer confidence, which are seen as more significant than tariff impacts.

Who Thinks What?

President Donald Trump and Chinese President Xi Jinping view their preliminary agreement as an initial step to de-escalate the ongoing trade war, including a 10% reduction in US tariffs and increased Chinese purchases of American soybeans.

Analysts and economists, including Louise Loo of Oxford Economics, suggest that these measures are unlikely to significantly address the deeper structural economic challenges in either the United States or China, with tariffs “fading in macro relevance” for China’s issues.

American soybean farmers, who have been severely impacted by China’s embargo, may find relief in the agreement’s provision for increased purchases, but potentially too late as many may have already sold their yields at lower rates during peak harvest season.

President Donald Trump and Chinese President Xi Jinping met in South Korea on Thursday, revealing initial plans for a trade deal aimed at de-escalating the ongoing trade war. The agreement includes a 10% reduction in US tariffs on Chinese goods, a delay in China’s rare earth export controls, and increased Chinese purchases of American soybeans. However, analysts suggest these measures are unlikely to significantly address the deeper economic challenges plaguing both the United States and China.

US Economic Landscape

The proposed trade agreement aims to alleviate some of the economic strain felt by businesses and consumers since Trump returned to office. While a 10% tariff reduction brings the effective rate on Chinese exports down to 47%, experts believe more comprehensive actions are needed to heal festering economic wounds.

For American soybean farmers, who have been severely impacted by China’s embargo since May, the agreement may offer relief, but potentially too late. China’s historical role as the largest export market for US soybeans means the embargo significantly depressed prices, and with peak harvest season underway, many farmers may have already sold their yields at lower rates.

The US job market, which was already weakening before the trade war, has seen hiring slow to a crawl in recent months. President Trump’s aggressive tariffs have exacerbated this uncertainty, leading businesses to hesitate on hiring and even initiate layoffs. The Bureau of Labor Statistics indicates more unemployed individuals than available jobs for the first time in years.

Beyond tariffs, advancements in artificial intelligence are also contributing to job cuts, as evidenced by Amazon’s recent layoffs. Federal Reserve Governor Christopher Waller noted in recent remarks that if AI represents a structural shift in labor demand, monetary policy may not be an effective tool to fix the systemic damage. Concerns also exist that lower interest rates could fuel inflation, already high due to tariffs and tighter immigration controls affecting labor supply.

China’s Economic Woes

Despite the resilience of its exports amid President Trump’s tariff offensive, China continues to grapple with long-standing domestic economic issues. These challenges include a prolonged property downturn, persistent deflation, dampened consumer confidence, and high youth unemployment, which limit the immediate benefits of any trade deal.

Louise Loo, head of Asia economics at Oxford Economics, stated in a note on Thursday that the revised trade terms are unlikely to materially shift China’s structural challenges, where tariffs are “fading in macro relevance.” She estimated that a fentanyl-related tariff reduction, part of the deal, might add only a “marginal” 0.2% to China’s growth forecast next year.

Recent economic data further illustrates a gloomy outlook for China, with factory-gate prices declining for the 36th consecutive month in September, indicating ongoing deflation. Consumer demand is also waning, with retail sales growth slowing to a 10-month low of 3% in September compared with a year ago.

The property sector remains a significant concern, as new home prices sank in September at their fastest pace in 11 months, despite it typically being a peak season for spending. This protracted slump, which began in 2021 with developer debt defaults, is expected to continue weighing on consumer sentiment.

A Preliminary Agreement

The agreement reached between President Trump and President Xi is currently a preliminary draft, requiring further negotiations between American and Chinese counterparts to become a finalized deal. While it provides immediate relief by removing the threat of an additional 100% tariff on Chinese exports, analysts remain skeptical that it will fundamentally resolve the deep-seated economic challenges facing either nation.