The Trump-Xi Summit

There was considerable anxiety ahead of US President Donald Trump’s meeting with his Chinese counterpart, Xi Jinping, in South Korea. Many feared the president would make significant concessions to secure a trade deal. Some observers even suggested that Trump might throw Taiwan under the bus by endorsing Beijing’s goal of reunification. Europeans feared that he might reach an agreement that allows smooth delivery of critical minerals and rare-earth magnets to American companies but fails to resolve the shortages in Europe. The day before the meeting, Trump said he would talk to Xi about selling China Nvidia’s Blackwell B30A chip, which is more powerful than the H20 chip that Nvidia is currently allowed to export. This prompted criticism from White House officials and members of Congress.

In the end, none of these outcomes emerged as part of the US-China deal. Instead, a few modest agreements were reached that roll back the tit-for-tat measures that both sides have taken in the past two months. The result returns the two countries to the pre-September status quo ante on trade and marks a fragile truce in their trade war. Still, wins for the United States include Chinese purchases of agricultural goods and oil and gas from Alaska; increased Chinese cooperation to end the deadly fentanyl trade; a pledge from Beijing to finalize a deal on TikTok; and a year-long suspension of China’s export licensing regime for rare-earth minerals that are essential for making a broad range of civilian and military high-tech products such as smartphones and electric vehicles, as well as high-tech military equipment such as fighter jets, submarines, and lasers.

China scored gains as well. The United States agreed to cut the 20% fentanyl-related tariff by half; suspend Section 301 investigations into semiconductors, logistics, and shipbuilding; take steps to allow Chinese investment in the United States; and delay the “50% rule” that would apply restrictions and export license requirements to any shipments from Chinese companies with 50% or greater ownership by blacklisted entities.

In addition, both parties agreed to pause for one year their newly introduced port fees on ships linked to the other.

The Chinese will likely conclude that their strategy of escalating to de-escalate worked. By demonstrating that it has a chokehold on most rare-earth minerals and magnets, Beijing forced a return to the understanding that had been reached by US and Chinese negotiators in Madrid about six weeks ago. China will undoubtedly attempt to maintain control over the mining, processing, and refining of rare earths and, if necessary, deploy this weapon again to remind the United States (and other countries) of their vulnerability.

The trade truce provides both sides with some breathing space and may temporarily stabilize the US-China relationship. The deal, however, is not a structural reset of that relationship. Intense US-China competition will persist in many areas, including innovation and the application of technology. The countries will also continue to compete to prove the superiority of their political and economic system, and to possess the power to shape and lead the international order.