Both sides will announce a win. But no key issues will be resolved.
Fundamental Issues Unresolved
Bloomberg reports US-China Trade Truce Leaves Fundamental Issues Unresolved
Three Key Takeaways
- Chinese and US trade negotiators have lined up diplomatic wins for Donald Trump and Xi Jinping to unveil at a summit, pleasing investors but leaving deeper core conflicts unresolved.
- The deal is expected to see China resume soy purchases and America walk back its latest tariff threat in exchange for securing Beijing’s critical rare-earth magnets.
- Analysts cautioned that the deal ignores thorny issues, including fundamental fights over national security and Trump’s stated core mission of rebalancing trade, which will be harder to tackle in the future.
US-China Trade Deal Issues
Fundamentals Not Changed
“Both sides now seem to be focused primarily on stability,” Daniel Kritenbrink, partner at The Asia Group and former US assistant secretary of state for East Asian and Pacific affairs, told Bloomberg Television. “But none of the fundamentals in this relationship have changed.”
The removal of fentanyl tariffs on China could limit its US export losses to less than 10%, according to Bloomberg Economics’ Maeva Cousin.
Ultimately, the deal signaled amounted to a mix of small issues, said Scott Kennedy, senior adviser at the Center for Strategic and International Studies in Washington, noting Beijing’s industrial policy seemingly wasn’t up for discussion.
“They’ve kicked the can to the side and are focusing on very concrete, narrow issues, putting aside broader questions about China’s economic system and economic security,” he added. “It’s highly unlikely they’ll ever address those broader issues head on.”
How We Got Here
- Trump put a 20 percent tariff on all Chinese exports on the basis of China’s role in channeling fentanyl to the United States.
- Trump added another 125 percent tariff that he later dropped to 10 percent after China retaliated.
- On October 10, Trump hit China will 100 percent tariffs and backed down when China restricted rare earths.
- Trump placed fees on Chinese ships that dock in American harbors, expanded its technology controls, and threatened an additional 100 percent tariff on Chinese goods as of Nov. 1.
- China retaliated with fees on US ships and Trump backed off.
That’s a very incomplete list.
Now What?
Hooray, China will buy more soybeans, loosen export restrictions on rare earths, and pledge to do more about fentanyl.
In return, Trump will not do 100 Percent tariffs and will roll back some of the so-called fentanyl tariffs.
Since April, there have been about seven major tit-for-tat Trump escalations with China, soon followed by Trump Tacos when China retaliated.
If the above outline holds, congratulations! Things will be back to where they roughly were in March.
Q: Since both Trump and Xi are liars, what do we really have?
A: The answer is an uneasy truce.
There may be other agreements but will Xi honor them? Trump?
No key items will be addressed but China will buy more soybeans, at least for a while, so Trump will brag. He will fail to recall that it was his actions that caused China to stop buying soybeans.
This is a win-win from where we were a week ago, but a big pile of nothing compared to where we were earlier this year.
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China can easily block rare earth exports to the world. If that happens, Trump will panic.
We should not be in this position, but we are.
June 5, 2025: Two-TACO Trump Day on His Call to Xi Over Rare Earth Elements
Trump is hyping up his call with China’s Xi. But chalk up 2 more TACOs.
Please recall Trump’s amusing statement that day: “There should no longer be any questions respecting the complexity of Rare Earth products.” What a hoot.
August 4, 2025: China Again Chokes Off Critical Rare Earths Needed for Defense
Trump threatened China with tariffs for doing business with Russia. Guess what?
October 19, 2025: Trump and Xi in Standoff, Each Blame the Other for the Trade War
What to Expect at the Xi Trump Meeting
I suspect fluff announcements over soybeans or other meaningless chatter that both sides may praise.
There is no reason for China to offer much. Trump has midterm election concerns, farmer concerns, and he should have recession concerns.
If there is anything, Trump will brag about it.
But unless Trump makes serious concessions, China won’t either.
Regardless, no matter what comes out of this meeting, Trump is prone to trade temper tantrums to which China will respond in kind.
Look for an unstable truce.
But Trump is backing down on some threats already as economic damage sets in.
And so here we are. The promised hype over soybeans is about to begin.
Then we will roll the clock back to April and look forward to doing this all again at some future date.
This post originated on MishTalk.Com
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Mish
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