OPINION | Trump-Xi Talks: Short-term truce, long-term friction

US President Donald Trump (left) Chinese President Xi Jinping in Busan (Source: PTI via AP)

US President Donald Trump met his Chinese counterpart Xi Jinping in Busan on October 30. The much anticipated meeting, which also marked their first face-to face meeting since 2019, was another attempt - albeit at the highest level - at containing the severe escalation of trade war that began with Trump’s presidency in January this year.

What are the two sides claiming? 

The meeting that lasted for 100 minutes affirmed the consensus reached between the two countries during the trade consultations in Kuala Lumpur.

Soon after the meeting, Trump said that his meeting with Xi was amazing. He informed that the US would cut average tariff rate on Chinese imports to 47% from 57% - by reducing the currently 20% fentanyl-related tariff to 10%. In return, he said that China has agreed to buy more farm products and raise imports of soybeans. He also informed that China has agreed to ease the restrictions on rare earths. Trump claimed that the rare earth issue has been “settled.” The US is, however, yet to release any official document on the contours of the agreement.

Chinese statement had a lot more details

The Chinese Commerce Ministry, on the other hand, was a lot more precise and detailed in its statement. It confirmed that in addition to removing the 10% fentanyl-related tariffs, the US also agreed to keep the 24% equitable tariffs on Chinese goods suspended for another year. In return, China’s commerce ministry said that Beijing will adjust its countermeasures against the aforementioned US tariffs.

China’s commerce ministry also clarified that the US will suspend for one year the enforcement of its 50% affiliates rule on exports control announced on September 29 - which extended the export-licensing requirements to companies majority-owned by parties on the Entity List, Military End-User List or a subset of the list of Specially Designated Nationals - mostly impacting Chinese entities. In return, China agreed to suspend its October 9 export control measures for one year.

Finally, the ministry said that the US agreed to suspend its Section 301 investigations against Chinese companies for a year. And in response, China will also suspend specific countermeasures.

The trade war is far from over

Despite the two countries expressing confidence in the talks and touting the meeting as somewhat successful, the trade war between the world’s two largest economies is far from over.

To begin with, the current exemptions and relaxations mostly relate only to the latest round of export control measures announced.

China has only suspended the extensive export control measures announced on October 9 - that included restrictions on export of rare earth technical secrets, rare earth processing equipment, five additional rare earths, battery manufacturing equipment - along with the extraterritorial export control measures.

The export control measures relating to seven of the total 17 rare earths and their magnets announced in April remain in operation. Of these seven rare earths, the exports remain halted for samarium - vital for magnets in military equipment. For others, the licences to export have to be renewed every six months. Thus, contrary to Trump’s claims, the rare earths issue is far from “settled”. On the other hand, the US export controls on the sale of high-end chips to China continue to remain in force.

Secondly, the consensus reached is subject to approval by the respective administrations, as Trump informed. The delay in release of official readout of the agreement by the US raises concerns.

One would do well to recall how the the outcomes of Geneva talks unfolded earlier this year. Despite the two sides agreeing to withdraw restrictions, each side blamed the other of violating the understanding and the truce.

Structural issues remain

For both the US and China, the desire for stability is at odds with their national goals. The sentiment was captured in China’s Ministry of Foreign Affairs readout after the Trump-Xi meeting in Busan. It quoted Xi as saying, “Given our different national conditions, some differences are inevitable, and as the world's two largest economies, occasional friction is normal.”

China, at its recently concluded Fourth Plenum, identified technological self-reliance as one of the priorities. Further, it reiterated the confidence in the developmental path adopted under the leadership of the Communist Party of China. This suggests that the Chinese are committed to an economic model that underpins their developmental trajectory. This, in turn, means a reluctance on the part of the Chinese leadership to redress the imbalance in its economy that the US accuses it of.

On top of that, the geopolitical contestation - fuelled by the US’ need to contain China and China’s expanding capability to hit back at the US - will only intensify frictions and conflict in the domain of economy and technology.

(Amit Kumar is a Research Analyst with the Takshashila Institution’s Indo-Pacific Studies Programme.)

Views are personal and do not represent the stand of this publication.