Why Taiwan is relieved about the outcome of the Trump-Xi meeting | DW News

Key Concepts

• Tariff Reduction: US President Donald Trump announced a reduction in tariffs on Chinese imports from 57% to 47%.
• Rare Earth Minerals: China agreed to end its boycott of US soybeans and maintain the supply of critical rare earth minerals.
• Framework Agreement: A tentative agreement was reached covering tariffs, rare earths, agricultural trade, fentanyl, and TikTok.
• Status Quo Ante: The agreement largely aims to return trade relations to their pre-September state.
• Escalation to De-escalation: China's strategy of escalating threats regarding rare earth exports to force a de-escalation from the US.
• State Subsidies, Market Access, Trade Secrets: Long-standing areas of friction in US-China trade that were not addressed in this agreement.
• Phase One Trade Deal: A previous agreement where China pledged to buy US agricultural goods, which was not fully met.
• Taiwan: The issue of Taiwan was notably absent from discussions, providing relief to Taiwan.
• Ceasefire/Pause in Tensions: The agreement is viewed more as a temporary truce or ceasefire rather than a comprehensive trade deal.
• Technological Competition: Underlying competition between the US and China for dominance in future technologies and shaping the international order.

Summary of US-China Trade Talks

Tariff Adjustments and Key Agreements

US President Donald Trump announced a significant reduction in tariffs on Chinese imports, lowering the rate from 57% to 47%. This decision followed his first in-person meeting with Chinese leader Xi Jinping since Trump's return to office. The leaders convened in South Korea for a meeting lasting just under two hours.

In addition to the tariff reduction, President Trump stated that China had agreed to cease its boycott of US soybeans and to ensure the continued flow of critical rare earth minerals. This meeting was described as an opportunity to "iron out the kinks" after months of a "tit-for-tat trade war."

The US secured access to rare earth minerals, while China obtained reduced tariffs and a potential pathway for American-made chips. President Trump characterized the meeting as "great," "friendly," and "good for two very large powerful countries."

The US agreed to reduce China's overall tariff rate by 10% to 47% in response to China's stricter measures to curb the flow of fentanyl into the US. In return, China will pause export controls on rare earth minerals, which are essential for the production of vehicles, aircraft, smartphones, and weaponry. This action is expected to remove a significant "roadblock" for these industries.

Nature of the Agreement and Future Outlook

While this one-year agreement is considered a step forward, a more comprehensive trade deal is yet to be finalized. President Trump indicated that a deal would be signed "pretty soon," and President Xi stated that the countries should finalize the next steps "as soon as possible." Both leaders agreed to maintain regular communication, with President Trump expressing his intention to visit China next year and inviting President Xi to the US. The current outcome is characterized as a "trade truce for now" between the two global powers.

Bonnie Glazer, Managing Director of the Indo-Pacific Program at the German Marshall Fund, described the agreement as a "modest one." She noted that the deal involves rolling back punitive measures taken by both countries over the past two months, essentially returning to the "pre-September status quo ante on trade." However, she emphasized that nothing has been signed yet, and negotiators will likely work out further details.

A significant positive development is the suspension of China's extensive export licensing procedures for rare earth magnets and minerals, which had caused shortages globally. The US has also rolled back some of its export restrictions and agreed not to add more Chinese companies to its entity lists.

Regarding fentanyl, China has committed to taking actions to counter money laundering related to the trade. The US, in turn, reduced fentanyl-related tariffs by 10%, though approximately 47% tariffs remain on Chinese goods. The sustainability of this agreement is uncertain as it is not yet "signed, sealed, and delivered."

Lingering Concerns and Unaddressed Issues

The current situation is described as an "uneasy peace," with tariffs still in place and an annual review of China's rare earth policy anticipated. A major concern raised is the lack of progress on long-standing friction points in the bilateral trade relationship. These include China's extensive use of state subsidies, restrictions on foreign companies' access to key Chinese market sectors, and cyber-enabled theft of trade secrets. Experts hope that future negotiations will address these fundamental issues to create a "level playing field."

Agricultural Trade and Past Agreements

The framework includes an agricultural component, covering US soybeans and other farm products, which were part of a previous deal. The White House's increased confidence in China's adherence to obligations under this new framework, compared to previous signed deals, is questioned. The Phase One trade deal, where China pledged to purchase large quantities of US agricultural goods, was only about 60% fulfilled, with China citing the COVID-19 pandemic as the reason. There is a possibility of the US investigating this past deal. The current agreement includes China's commitment to purchasing soybeans, oil, and gas over the next three years.

Omissions and Geopolitical Implications

Notable omissions from the framework include discussions on Taiwan. This absence has provided relief to Taiwan, though it is acknowledged that conversations about Taiwan could occur during President Trump's planned visit to China next year. President Trump's focus on achieving "wins" for the US and his desire to avoid potentially problematic issues like Taiwan are highlighted.

Expert Analysis and Perspectives

Bonnie Glazer observed President Trump's body language, noting his apparent respect for President Xi, which contrasts with his interactions with European leaders. She suggests that Trump's flattering language is a tactic to influence negotiations, while President Xi remains focused on substance. Glazer believes China has skillfully managed the relationship by employing an "escalate to de-escalate" strategy, particularly concerning rare earths. China's near-monopoly on the reprocessing and refining of certain critical minerals gives them significant leverage.

William Yang, Crisis Group's Senior Analyst for Northeast Asia, views the meeting primarily as a "pause in tensions" rather than a fundamental shift in the US-China relationship, which is characterized by intense competition for technological dominance and shaping the international order. He anticipates continued close cooperation between China and Russia, which is problematic for the US and Western countries.

Janelle Dumalo, reporting from Washington, noted President Trump's enthusiastic assessment of the meeting, giving it a "12 out of 10 rating." She reiterates that the agreement is more of a "ceasefire" than a definitive end to the trade war, given the complex and "thorny issues" that remain unresolved. The high tariffs on Chinese products and US export controls on high-end chips persist, leaving room for miscalculations and further escalation.

Farmers, particularly soybean producers, expressed relief at the agreement, viewing it as a "meaningful step" towards reestablishing a stable trading relationship. However, they are seeking more "lasting and durable" solutions.

William Yang further clarified that the agreements reached largely involve walking back to previous tariff levels and lifting tit-for-tat measures. He expressed uncertainty about the implementation details and the ability of both sides to uphold the "one-year truce."

Regarding China's concessions, the immediate benefit was the tariff reduction. However, economists suggest this 20% reduction may not significantly improve the trade relationship. China retains the leverage to tighten export controls on rare earths if the US does not honor its commitments. A more optimistic development for Beijing is the potential for renegotiations between semiconductor chip giant Nvidia and China, though the US government will likely retain oversight.

Yang concluded that there was no clear winner or loser, with the primary outcome being the reestablishment of personal connections between the leaders and addressing pressing issues. Both sides are expected to remain vigilant about potential deviations from the agreed-upon path.

Conclusion

The US-China trade talks in South Korea resulted in a temporary truce, characterized by a reduction in tariffs, a commitment to resume soybean imports, and the lifting of export controls on rare earth minerals. While this agreement de-escalates immediate tensions and addresses some critical issues, it does not resolve the fundamental, long-standing friction points in the bilateral relationship, such as state subsidies, market access, and intellectual property theft. The agreement is viewed as a pause rather than a comprehensive resolution, with the potential for future escalation remaining. The underlying intense competition between the two global powers in economic, technological, and ideological spheres continues.