Trump and Xi pause trade war, not rivalry

THE first in-person meeting since 2019 between Donald Trump and Xi Jinping on the margins of the APEC leaders' summit in Busan produced a politically useful agreement to de-escalate and stabilise immediate trade frictions, while leaving the deeper causes of US-China strategic competition unaddressed.Both leaders agreed to reciprocal visits — Trump to Beijing in April 2026, followed by Xi to the US — signalling a commitment to ongoing dialogue. The outcome provides short-term stability for America's relations with China and for global markets, but does little to ease underlying structural differences, such as China's manufacturing overcapacity and its assertive stance on Taiwan, the South China Sea and elsewhere in the Indo-Pacific.The two sides issued separate readouts with common threads but divergent stories. The Chinese statement was cautious, generic and sovereignty-focussed while the US one was triumphalist, transactional and designed for domestic political consumption.Trump described the meeting as "amazing" and rated it a "12 out of 10," claiming broad agreement on key points. The US side highlighted tariff adjustments, Chinese commitments on rare-earth flows and pledges for major agricultural purchases. It suggested a one-year trade truce, suspending recent escalatory measures while leaving most pre-existing tariffs and export controls in place. Trump confirmed this arrangement as subject to renegotiation, though Chinese officials did not detail timelines or specific commitments.The Chinese Foreign Office described the talks as constructive, stressing that what was agreed amounted to a preliminary consensus subject to legal review and technical specifications. Details such as volumes of agricultural purchases or verification mechanisms were left to technical teams. China reiterated that core policy prerogatives remained within its sovereign remit.At Busan, Trump and Xi endorsed the provisional framework negotiated earlier in Kuala Lumpur. From the US perspective, concessions extracted from China addressed immediate vulnerabilities. Beijing committed to resuming "tremendous amounts" of purchases of US soybeans, sorghum and other agricultural products, reversing import curbs that had hurt US farmers.China suspended new export controls on critical minerals and port fees on US-bound shipments, ensuring continuity for industries reliant on rare earths. Trump characterised this as resolving a "roadblock", though China preserved the leverage it can exercise later.Tariff relief included a reduction in the overall US levy on Chinese goods from 57% to 47%, with fentanyl-related duties halved from 20% to 10%, contingent on Xi's assurance of "strong action" against precursor chemical exports. The US also paused Section 301 investigations into China's maritime, logistics and shipbuilding sectors, averting new penalties.China thus secured meaningful concessions that ease domestic pressures without compromising core policies. Tariff cuts relieve export-dependent manufacturers amid slowing growth. Suspension of US export controls on tech subsidiaries and port fees provides relief for firms like Huawei, while reaffirming prior understanding on TikTok.Beijing's commitments — on agriculture and fentanyl — target US domestic priorities but represent tactical adjustments rather than policy overhauls, allowing China to preserve dominance in rare-earth processing and support for industrial policies.This bargain reflects differing negotiation philosophies. Trump emphasised coercive leverage through tariff threats and alliances with Indo-Pacific partners to diversify supply chains, yielding US gains in agriculture and minerals.China employed asymmetric tools like rare-earth restrictions and buying power for US farm produce, extracting tariff relief, weakening of US export controls and investigative pauses. China's concessions are calibrated to buy time for economic stabilisation, while US gains prioritise electoral and sectoral reliefs. China maintained policy autonomy on issues like industrial overcapacity, a substantive structural challenge absent from the dialogue.On balance, US concessions enhance Chinese market penetration, while Beijing's yield short-term US relief without eroding China's long-term industrial edge. The US demonstrated effective coercive diplomacy by translating credible threats into near-term outcomes. China exercised superior agenda control by narrowing the negotiation to transactional matters and insisting on procedural, conditional measures instead of systemic reform.The net effect is that China secured the more durable strategic advantage: it retained policy space and the ability to re-open pressure points later. The US achieved visible tactical wins, but it did not obtain structural remedies that would fundamentally alter the trajectory of the bilateral economic relationship. In strategic terms, China managed escalation dominance more effectively even as the US claimed a short-run victory.Trump's description of the meeting as a "G2" moment functioned primarily as rhetorical flourish. The term amplified the meeting's optics and enhanced political theatre without producing an actual governance arrangement or carving out spheres of influence, as apprehended in some quarters. However, it did suggest Trump's readiness to treat China as a peer power.Trump's announcement on resuming nuclear testing, barely an hour before his meeting with Xi, complicated the diplomatic environment. The timing introduced awkward optics and elevated mistrust, giving Beijing rhetorical leverage to portray US behaviour as unpredictable. Nevertheless, the nuclear announcement did not derail the trade truce.It remains to be seen if Trump will follow through with steps to operationalise his announcement. The nuclear dimension promises to figure more prominently in US-China contestation, as China augments its arsenal and a major Communist Party document issued on October 28 pledged to "strengthen strategic deterrence capabilities, [and] safeguard global strategic balance and stability", an implicit reference to narrowing the nuclear gap with the US and Russia.The trade truce's durability depends on the specificity and transparency of the technical annexes that working groups produce, on credible verification mechanisms for export-licensing and tariff actions and on the domestic political calculus in both capitals. Financial and commodity markets may enjoy a reprieve, but the basic differences over Taiwan, tech supremacy and national security remain unresolved and may reappear as flashpoints.The Trump-Xi meeting delivered a managed de-escalation that reduced near-term economic risk while preserving the underlying contest between two powers.Busan should be seen as a useful operational pause rather than a settlement, though the dialogue process has been reinforced and may yield more substantial outcomes. The meeting made clear how much stronger China has become since 2019.The changed dynamics between the US and China, along with Trump's ambivalence on the strategic challenge posed by Beijing in the Indo-Pacific, have significant implications for India, including a weakening of the rationale for the India-US partnership and the efficacy of external balancing in New Delhi's deterrence strategy vis-à-vis China.Ashok Kantha is ex-Ambassador to China.

Trump and Xi pause trade war, not rivalry

China secured the more durable advantage — retaining policy space even as the US claimed a short-term victory.

Ashok Kantha

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