'No deal yet' - US and China agree to framework for a trade deal ahead of Trump-Xi meeting | DW News

Key Concepts

• Trade War Framework: An agreement outlining the key areas and principles for a potential trade deal between the US and China, paving the way for leaders to finalize details.
• Tariffs: Taxes imposed on imported goods, used as a leverage tool in the trade war.
• Rare Earth Minerals: Critical components for high-tech industries, with China holding a dominant position in their global supply chain.
• Soybeans: A major US agricultural export, significantly impacted by Chinese retaliatory tariffs.
• Fentanyl Ingredients: Chemicals used in the production of fentanyl, with discussions on limiting their flow to the US.
• TikTok: A popular social media platform, subject to discussions regarding its ownership and operation in the US.
• World Trade Organization (WTO): An international organization that regulates global trade, whose intervention was notably absent in the US-China trade dispute.
• Trans-Pacific Partnership (TPP): A trade agreement that the Obama administration pursued, aiming to expand US sales in digital goods and other areas.
• Digital Services Taxes: Taxes proposed by some countries, particularly in Europe, on large digital service providers like Google and Amazon.
• Supply Chain Diversification: The strategic effort by countries to reduce reliance on a single source for critical materials by developing alternative supply chains.

Meeting Between Trump and Xi Jinping

The transcript discusses an upcoming meeting between US President Donald Trump and Chinese leader Xi Jinping in South Korea, the first face-to-face encounter since Trump's return to the White House. The US anticipates that the two leaders have reached a "framework for trade issues with China," which is expected to lead to a trade agreement.

Framework for Trade Deal

Negotiators from the US and China have reportedly "hashed out a framework" on the sidelines of the ASEAN summit in Malaysia. This framework aims to pause steeper American tariffs and Chinese rare earths export controls. The US Secretary of State, Scott Bessant, indicated that Beijing has agreed to make "substantial purchases of US agricultural products, especially soybeans." China had previously halted soybean purchases in retaliation for US tariffs, causing an estimated $12.8 billion loss in US farmers' revenue. Discussions also included shipping fees and limiting the flow of Chinese fentanyl ingredients to the US, though specific details remain scarce.

Expert Analysis of the Framework

Professor Meredith Crowley from the University of Cambridge explained that a "framework" implies that "the most important and critical issues have been sort of pre-negotiated." She suggests that while a few "sticking points" might remain, there is a "general broad alignment" for concessions from both sides, allowing the leaders to finalize the deal without embarrassment.

Key Issues Covered in the Framework:

• Tariffs: The framework aims to avert further tariff escalations.
• Rare Earth Minerals: China's threat to restrict rare earth exports was a significant concern. The US had threatened 100% tariffs if China imposed global export controls on these minerals.
• Soybeans: China's agreement to resume substantial purchases of US agricultural products, particularly soybeans, is a key element.
• Fentanyl Ingredients: Discussions have occurred regarding limiting the flow of these ingredients to the US.
• TikTok: The platform's future in the US has also been part of the discussions.

Strategic Significance of Soybeans and Rare Earths

The choice of soybeans and rare earth minerals as key negotiation points reveals the priorities and perceived vulnerabilities of each side.

• Rare Earth Minerals:

  • US/Western Vulnerability: The reliance on China for rare earth minerals is seen as a significant long-term risk for the US and other Western countries.
  • China's Leverage: China's threat to withhold rare earth exports was a serious short-term concern.
  • Long-Term Solution: The West is focused on building alternative supply chains for these materials to reduce dependency on China.
  • Political Win for Xi Jinping: By agreeing to allow the flow of rare earths to resume, China's leader can present this as standing up to the US and securing concessions, enhancing his domestic credibility.

• Soybeans:

  • Political Tool for Trump: The soybean issue has been a recurring point since 2019. China's agreement to buy more soybeans, even if not economically groundbreaking, allows President Trump to claim a concession from China to his domestic constituency.
  • Economic Impact: The halt in soybean purchases significantly impacted US farmers.
  • Gamesmanship: The focus on soybeans is seen by some as political gamesmanship, returning to pre-trade war trade patterns.

Impact on Trade Deal Negotiation Methods

The transcript raises the question of whether Donald Trump's approach has caused "irreparable damage to the established methods of negotiating trade deals," noting the absence of calls for WTO intervention.

Comparison with Previous Administrations:

• Obama Administration and TPP: President Obama pursued the Trans-Pacific Partnership (TPP), which included priorities like expanding US sales in digital goods.
• Trump Administration's Progress: Despite the turbulence, the Trump administration has reportedly made progress in Southeast Asia by inducing countries to allow free trade of American goods. They have also opposed digital services taxes imposed by Europe on US tech giants like Google and Amazon.

Expert Perspectives on the Trade Deal

• Fraser Howy (Economist and Author):
  • Positive Step, but Manage Expectations: Howy views the framework as a "positive step," especially the potential to avert further tariff increases. However, he cautions that "expectations need to be kept in check" due to the complexity of the US-China relationship and Trump's "erratic" nature.
  • Ridiculous Position: He describes the US arguing over soybeans versus rare earth minerals as a "ridiculous position."
  • No Grand Bargain: Howy believes that "we are not coming to any grand bargain this weekend at all."
  • Power Dynamics: He finds it difficult to definitively state who holds stronger cards, noting that neither side is a "silver bullet." While China is dependent on trade with America, America also possesses significant power.
  • Rare Earths Solution: Howy emphasizes that the solution for rare earths is not a trade deal but for the US and other Western countries to develop their own mining, refining, and processing capabilities, which is a multi-year, multi-billion dollar investment.
  • Soybean Impact: He acknowledges that resuming soybean purchases will help US farmers but notes that soybeans can be sourced from many countries. He expresses skepticism about the promises made by both Trump and the Chinese, predicting that these issues will "continue to flare up time and time again."
  • TikTok Uncertainty: Howy notes that TikTok operates in "extra legal territory" and that while it "should be banned in America," it is not. He suggests the deal might involve Trump wanting it sold to his associates, but the future remains uncertain.

Specifics on Rare Earths and Soybeans

• Rare Earths: Bessant believes China will likely delay its export license system for rare earths by about a year. This is seen as positive news for the US and other countries, as China has significant leverage in the processing and delivery of these materials.
• Soybeans: China's willingness to buy soybeans again is seen as a direct benefit to US farmers. However, it's also noted that soybeans are a commodity that can be sourced from other countries, making it a flexible tool in trade negotiations.

Conclusion

The upcoming meeting between Trump and Xi Jinping is framed as a crucial moment to solidify a trade deal framework. While a framework has been established, covering key areas like tariffs, rare earths, soybeans, fentanyl ingredients, and TikTok, experts caution against expecting a comprehensive resolution. The discussions highlight the complex interplay of economic interests, political maneuvering, and strategic vulnerabilities between the two global powers. The long-term solution for critical resources like rare earth minerals lies in supply chain diversification rather than solely relying on trade agreements. The transcript suggests that while immediate tensions might be eased, underlying trade disputes are likely to persist.