It appears that both the United States and China made concessions in the recent meeting between US President Trump and President Xi (October 30). What is your most up to date and in depth assessment?
Economics 100, Chief Economist:
Executive Summary
The meeting between Donald Trump and Xi Jinping on 30 October 2025 in Busan, South Korea, produced a temporary de‑escalation in the U.S.–China economic confrontation rather than a durable transformation of their strategic relationship. Both sides made tangible concessions: the U.S. agreed to reduce certain tariffs on Chinese goods, and China pledged to resume large U.S. agricultural purchases and ease rare‑earth export controls, among other items. But the core issues—technology rivalry, structural economic competition, geopolitical flashpoints like Taiwan—remain unresolved and still carry high risk of future escalation.
Comparative & Historical Context
Historical parallels:
- This is reminiscent of previous U.S.–China trade “pause” arrangements (e.g., the Phase One deal of 2020) where both sides stepped back from escalation but did not resolve underlying systemic competition.
- Like the 2018–19 trade war cycle, the U.S. used tariffs as coercive leverage and China responded with export controls and non‑market counter‑measures (e.g., rare‑earth restrictions, supply‑chain redirection).
- The summit structure—rapid leader meeting, immediate public announcements, limited detailed commitments—echoes earlier U.S.–China summits that ended in “frameworks” rather than binding treaties.
This time’s differences:
- China obtained a clearer concession on rare earths: it agreed to suspend the newly‑announced export controls for a year (rather than permanently).
- The U.S. moved to reduce its “fentanyl‑precursor” tariff on Chinese goods (from 20 % to 10 % for that category) and thereby lowered the average tariff on Chinese goods from about 57 % to 47 %.
- Agriculture appears explicitly back as a bargaining chip – China committed again to large U.S. soybean purchases.
In essence, the meeting reflects a truce mechanism rather than a strategic re‑order: both sides buy time, hedge future risk, attempt to stabilise after a period of high tension.
Strategic & Relative Impact
Who benefits / who loses?
- China benefits: It achieved relief from U.S. tariff pressure and a one‑year pause on supply‑chain leverage (rare earths) which affords it strategic breathing room. Its economy, facing slowing growth, gains by re‑opening agricultural channels and moderating the trade front.
- U.S. benefits: Its domestic constituencies—farmers, agriculture exports—gain from China’s renewed purchases. U.S. manufacturing and supply‑chains reliant on rare earths and Chinese material input get shelter from immediate shock.
- U.S. loses some leverage: By lowering tariffs and lightly easing pressure, the U.S. may have reduced its bargaining chip for more structural reforms (e.g., Chinese industrial policy, technology transfer regimes).
- China loses little immediate cost: It didn’t concede major structural changes (e.g., abolishing industrial subsidies, opening markets fully) but made tactical trade‑concessions.
Effect on global power dynamics, trade flows & markets:
- The truce helps global supply chains by averting immediate escalation in critical materials (rare earths) and port/ship‑fees. This reassures multinational firms.
- It reinforces the view that China remains a systemic competitor, but now one that can handle U.S. pressure and extract concessions. The U.S.-China competition may shift toward institutionalised containment rather than open trade war.
- Other countries may leverage this—e.g., ASEAN, EU supply‑chain actors—viewing the U.S.–China standoff as less volatile for the moment, but still uncertain in future.
- Markets responded modestly: the “risk premium” on China‑U.S. trade war declined, but because major unresolved issues remain, the relief is shallow and may be short‑lived.
Unintended Consequences & Risks
- Fragility of the deal: Because many commitments are loosely worded (“will work hard”, “consensus reached”, “suspend for one year”), there is high risk of reinterpretation or rollback. Analysts call this more a truce than a full deal.
- Strategic shift, but not address of root causes: The meeting did not tackle deeper issues—industrial subsidies, state‑owned enterprise competition, Taiwan/geo‑security, AI/semiconductors. These remain live risks.
- Window for China to accelerate: By gaining a short‑term freeze on U.S. pressure, China may use the year to advance its strategic plans (tech, manufacturing, Belt & Road) while the West is distracted. Some analysts interpret the pause as a tactical success for Beijing.
- Domestic political backlash: In the U.S., metal tariffs remain high overall—farmers may welcome purchases, but manufacturing industrialists and security hawks may see the concessions as sign of weakness. In China, hard‑liners may question giving any concessions even if tactical.
- Misinterpretation danger: Presenting this as “the end of the U.S.–China rivalry” would be premature. The framing of “deal done” risks misleading markets and policy‑makers into underestimating latent tensions.
- Escalation elsewhere: With attention on trade, other theatres (Taiwan Strait, South China Sea, human rights, sanctions) may see renewed contention as trade war recedes temporarily.
Final Insight & Steering Caution
In short: the Trump‑Xi meeting is a pause in escalation, not a pivot to stable cooperation. It shows that both the U.S. and China recognise the high cost of continued trade confrontation—but the outcome is still one of strategic hedging rather than resolution. For the U.S., the reduction in tariffs and re‑opening of agriculture markets is positive—but by doing so without extracting deeper reform, Washington may have given up some leverage. For China, gaining respite and stabilisation is a win in the short run, but the long‑term competitive dynamic with the U.S. remains unresolved.
Steering caution: We should avoid interpreting this summit as “peace” or “normalisation”. Instead, treat it as a strategic repositioning: both sides stepping back from the brink, resetting their tools, and preparing for the next phase of competition. The risk is that future escalation may resume in new form (technology controls, investment bans, supply‑chain decoupling) when this truce expires—especially given the one‑year time‑frame on key concessions.
“Trade policy is not simply about tariffs—it is about structural power, technological dominance and the ability of states to shape the global economy.”
― Wendy R. Carlin
In short: yes, both made concessions—but the deal is temporary, tactical, and does not alter the strategic competition. If you like, I can pull together a detailed risk matrix for 2026–27 showing where escalation is most likely next.
Muhammet Ali Zurnacı: Do it!
Economics 100, Chief Economist: ….
| Domain | Primary Actors | Risk Level (1–10) | Type of Risk | Potential Trigger Events |
|---|---|---|---|---|
| Trade Tariffs & Goods | USTR, Chinese Commerce Ministry | 6 | Policy Volatility | Collapse of 2025 trade truce |
| Rare Earths & Critical Minerals | Chinese MOFCOM, US DoD, USGS | 7 | Supply Chain Disruption | China reimposes export curbs |
| Semiconductors & Technology Access | US Commerce Dept, Chinese Ministry of Industry | 9 | Tech Decoupling / Innovation Choke | New US chip sanctions or ASML halts exports |
| Taiwan & Military Tensions | US Indo-Pacific Command, PLA, Taiwan | 9 | Military Conflict / Crisis | PLA exercises or Taiwan arms sales |
| South China Sea & Naval Presence | US Navy, Chinese Navy, ASEAN states | 8 | Naval Confrontation | Naval standoff near Spratly Islands |
| Digital Infrastructure (5G, AI) | Huawei, ZTE, US FCC, EU regulators | 8 | Cyber-sovereignty Fragmentation | AI export bans or 6G rollout wars |
| Human Rights & Sanctions | US State Dept, UN, NGOs, Chinese Security | 6 | Reputational & Economic Sanctions | Xinjiang/Hong Kong reports, Olympic protests |
| Belt & Road Initiative (BRI) Pushback | China’s NDRC, IMF, India, EU, G7 | 7 | Debt Diplomacy / Infrastructure Contestation | Debt defaults in Africa or South Asia |
| Financial Markets & Capital Controls | US Treasury, PBOC, Wall Street | 5 | Capital Flight / Investment Retaliation | Delisting Chinese firms, digital currency blocks |
| Multilateral Alliances & WTO Fragility | WTO, QUAD, BRICS, EU Commission | 7 | Norm Shattering / Rules-Based Erosion | WTO rulings ignored, BRICS-led alternatives |
Here’s the US–China Strategic Risk Matrix (2026–27). It outlines the top pressure points likely to escalate following the Trump–Xi truce, with their respective actors, risk intensities, and potential trigger events.
Economics 100, Chief Economist
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