When Donald Trump launched a trade war against China in April, threatening tariffs of up to 145 percent, the Chinese government said it would never bow to blackmail and vowed to "fight to the end."
The question now is whether the agreement reached by Trump and Xi Jinping in Busan, South Korea, means that the fight is truly over - and if so, on what terms.
Both sides have taken some of their strongest cards off the table, but this looks more like a truce than a lasting peace that would set stable boundaries in China-US relations. Still, the framework for a broader, longer-term diplomatic relationship is emerging - with the two leaders set to visit each other within a year. It is a far cry from what hawks in the US Congress hoped for when Trump came to power, and it will alarm politicians on both sides.
One problem was that Trump’s strategic goals in launching the trade war were never clearly defined—the balance between protecting traditional American manufacturing, restricting access to modern technology industries critical to U.S. national security, punishing Chinese trade practices, or, more broadly, trying to outdo China as a competitive threat—was unclear. Gradually, in the minds of some in the Trump administration, the fight devolved from a trade war into a geopolitical contest between two world powers—a conflict the world was waiting to see.
As a result, the past six months have been a tumultuous period marked by shifting tariffs, export restrictions, threats and counter-threats, delays, and antitrust investigations.
When analyzing trade agreements, it is usually said that "the devil is in the details," but when it comes to Trump's agreements - the devil often hides precisely in the lack of details.
For much of the crisis, U.S. tariffs on Chinese goods averaged 55%. That was well below the effective level of a 145% outright ban that Trump had previously threatened to impose, but still high enough to seriously test the resilience of the Chinese economy—a test that China passed.
What emerged from yesterday's meeting will take time to fully appreciate. In reality, it is only a framework agreement, and as was the case recently with Canada, such agreements can fall apart at any time. Moreover, when analyzing trade agreements, it is usually said that "the devil is in the details", but when it comes to Trump's agreements - the devil often hides precisely in the lack of details.
Much of what was agreed is a return to the status quo. China has agreed to delay potentially disastrous new restrictions on the export of rare earths for at least a year. It will also resume buying American soybeans. Beijing has agreed to do more to control exports of chemicals used to make fentanyl, a synthetic opioid that has fueled an overdose crisis in North America, the alleged reason for the 20% tariff. In return, Trump has agreed to cut that 20% rate in half, bringing the average U.S. tariff to 45%, still higher than India’s.
Trump, on the flight home from South Korea, was vague about the US role in easing licensing procedures for Nvidia's artificial intelligence chips to China, saying that the new, most powerful chip - Blackwell - was not even mentioned, and that it was a matter between China and Nvidia. A statement that security hawks in Washington will surely take note of.
Terms of the sale of TikTok's US arm, which is owned by Chinese firm ByteDance, will be announced separately - including the size of the stake ByteDance will retain, as well as the issue of control over the algorithm.
According to Trump's interpretation, fears that he intended to turn his back on Taiwan were also unfounded. The topic of Taiwan, he said - quite incredibly - was not even on the agenda.
More importantly, over the past six months, both sides have learned a lot about each other’s leverage and vulnerabilities—including which trade instruments work best. What is worrying for the United States is how successfully China has redirected exports of goods originally destined for the U.S. market to other, mostly Asian, markets since the U.S. tariffs took effect. Those who predicted a Chinese meltdown have been sobered by the fact that China’s stock market has risen 34%. China’s trade surplus is likely to be larger than last year. Meanwhile, U.S. inflation, fueled by tariffs, has quietly risen to a politically risky 3%.
First, after the US Department of Commerce changed its regulations in September, adding - by some estimates - another 10.000 Chinese companies to Washington's list of sanctioned companies, Beijing retaliated by massively expanding the scope of its export controls on rare earth elements - materials crucial to high-tech manufacturing, including cars, batteries and military equipment.
If fully implemented, these measures would give China the ability to restrict the production of a wide range of products worldwide that depend on even minimal amounts of rare earth metals originating in China. The sweeping restrictions, announced on October 9 and set to take effect in November, demonstrate the extent to which the United States has failed to wean its supply chains from China’s near-monopoly in rare earth materials processing.
It turns out that the United States has discovered how to fight back against a bully.
According to one source, Treasury Secretary Scott Besant, seeing how close the situation had come to the edge of the abyss, managed to convince Trump that the cost of confrontation had become too high - leading both sides to pull back from each other this week.
The truce is only for a year, but that could be to China's advantage. That period gives Xi time to further push China forward in developing future technologies, including green technologies and manufacturing, areas in which it already has a leading position and which are the backbone of a new five-year economic plan.
Equally important, China hopes that other countries will see it as a responsible and restrained world power that does not seek conflict but is strong enough to withstand American pressure.
At the very least, it's a clash of two leadership styles. Xi is a proponent of "war of position," while Trump is a man of "war of movement" - in which instinct trumps consistency and strategy. For now, the warrior of position is winning - or, at least, not losing.
The text is taken from "The Guardian"
Translation: NB
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