Can Donald Trump and Xi Jinping’s trade war truce really last? | The Intelligence podcast

Key Concepts

• Trade War Truce: An agreement to temporarily halt escalating trade restrictions and tariffs between two countries.
• Export Controls: Government regulations that restrict the export of certain goods or technologies.
• Tariffs: Taxes imposed on imported goods.
• Rare Earths: A group of 17 chemical elements with unique properties crucial for many modern technologies.
• Fentanyl: A synthetic opioid, the illicit trade of which has become a significant concern.
• Supply Chain Diversification: The strategy of spreading production and sourcing across multiple countries or regions to reduce reliance on a single source.
• Industrial Policy: Government strategies aimed at promoting specific industries or sectors of the economy.

Trade Deal Between Trump and Xi Jinping

The podcast episode discusses a trade deal struck between Donald Trump and Xi Jinping, aiming to de-escalate their ongoing trade war. The agreement was described by Donald Trump as "amazing," scoring it a 12 out of 10. China's commerce ministry confirmed that the essential elements of a trade deal have been agreed upon after months of negotiations, reducing the immediate risk of further escalation. Both leaders also agreed to reciprocal visits in the following year.

Contents of the Agreement

The deal primarily focuses on a one-year truce, involving the rollback of most recently imposed or threatened trade restrictions:

• China's Rare Earth Export Controls: China agreed to delay for one year new export controls on rare earths, which had previously caused global alarm.
• US Tariffs: The United States will not impose an additional 100% tariff on Chinese goods from November 1st, as threatened.
• Reciprocal Tariffs and Export Controls: The US will postpone for one year reciprocal tariffs that were scheduled to take effect on November 10th, as well as new export controls on subsidiaries of blacklisted Chinese firms.
• Shipping and Ports Measures: Both sides will postpone for a year measures introduced in a confrontation over shipping and ports.

Beyond the truce, specific agreements include:

• Fentanyl Trade: The US agreed to a 20% tariff linked to China's alleged failure to curb exports of chemicals used in fentanyl production. In return, China will increase efforts to stifle this trade.
• Soybean Purchases: China resumed the purchase of American soybeans, a trade that had been halted in May.

Outstanding Issues and Omissions

Despite covering "almost everything" as suggested by Trump, several significant issues remain unaddressed or unclear:

• TikTok's American Operations: The transfer of TikTok's American operations to US ownership was not explicitly mentioned by Trump, though China indicated that both sides would work on this issue.
• 2020 Trade Deal Investigation: American officials stated that an investigation into whether China violated an earlier trade deal signed in 2020 would continue.
• Chinese Investment in America and US Semiconductor Sales to China: There appears to be no clear agreement on these matters, although Trump indicated they were discussed.
• Taiwan: Trump stated that Taiwan did not come up in discussions, and China did not mention it in its statements.
• Underlying Problems: The deal is not sufficient to end the trade war entirely. Even with this agreement, the US will still maintain a 47% tariff on Chinese goods.

Uncertainty and Future of the Deal

The longevity of the deal is uncertain. Trump suggested a final deal could be signed soon but also indicated that it might be renegotiated annually, adding an element of unpredictability.

Broader Geopolitical Context and Contrasting Deals

The trade deal with China is contrasted with Trump's other engagements during his Asia tour. While the China talks focused on a truce, his interactions with Thailand, Malaysia, and Japan involved building leverage for future confrontations. These included agreements on:

• Supply Chain Diversification: Cooperation on diversifying supply chains for critical minerals, a key area of competition with China.
• Defense Alliances: Sharing technology with South Korea to enable the construction of nuclear submarines, bolstering the US-South Korean defense alliance.

These actions suggest a broader strategy to shore up alliances and diversify supply chains in anticipation of continued tensions with China. The underlying contest for economic and military superiority is expected to persist.

Prospects for the Truce Holding

While the current truce appears "reasonably promising," the podcast hosts highlight past "false starts" and temporary truces followed by escalations. Significant risks remain:

• Misunderstandings and Misinterpretations: The agreement could unravel due to communication breakdowns between negotiators.
• Failure to Solve Deeper Problems: The deal may not address fundamental issues, particularly China's industrial policy.
• Emergence of New Crises: Unrelated crises, such as high military tensions in the South China Sea and around Taiwan, or the resumption of US nuclear weapons testing, could destabilize the agreement.

Conclusion

The trade deal represents a positive step towards de-escalating the trade war, but it is a temporary truce rather than a resolution to the underlying issues. The broader geopolitical and economic competition between the US and China is ongoing, and the stability of this agreement remains uncertain due to potential misunderstandings, unresolved structural problems, and the risk of external crises.