Emerging from their first face-to-face meeting in six years, U.S. President Donald Trump and China President Xi Jinping appears to have reached a temporary truce in the trade war between the two economic superpowers. But all analysts believe that the Chinese leader walked out of the meeting with a new image – a leader of a country as powerful as the United States.
Even though Trump has claimed victory as expected, Xi shows how China today is capable of shaping the terms of any deal. It must have been a tough negotiation for Trump to admit that the meeting was a 12 on a scale of one to 10. By flexing China’s near monopoly on rare earths and its purchasing power over American soybeans, Mr Xi won key concessions from Mr Trump.
Claiming a victory, the U.S. president proudly announced – “All the rare earth has been settled. That roadblock is gone now, there’s no roadblock at all on rare earths”. He even exaggeratedly claims that Beijing promised to buy “tremendous amounts” of American soybeans. In truth, China agrees to relax the ban on rare-earth exports for only 1-year, whilst hasn’t specify how much soybeans to buy.
On the other hand, Beijing won the following – a reductions in tariffs, a suspension of port fees on Chinese ships and a delay of U.S. export controls that would have barred more Chinese firms from accessing American technology. The truce deal in South Korea also saw a pledge by China to crack down on the trade in the chemicals used to produce fentanyl.
In exchange for China’s 1-year suspension of rare earth minerals, which are needed to make everything from smartphones to submarines, and from magnets to missiles, the U.S. agrees to suspend for one year the implementation of its 50% penetration rule on export controls. Additionally, the 20% tariff on China over the fentanyl issue will be halved to 10%.
“Our farmers will be very happy! I would like to thank President Xi for this!” – Trump posted on Truth Social. But the person who is absolutely thrilled is none other than the president himself. Mr Trump pumped a fist in the air as he boarded Air Force One, and it’s not hard to see why. The drop in Chinese purchases hit Trump’s rural political base incredibly hard.
U.S. soybean farmers, who have been in a panic this harvest season, have called on the Trump administration for help as they dealt with billions of dollars in lost sales – even bankruptcies – to the world’s largest soybean importer. China placed orders for soybean shipments shortly before Thursday’s meeting, suggesting both Beijing and Washington had already agreed to the trade truce deal even before the Trump-Xi meeting.
Essentially, the reduction in tariff rates brings overall tariffs on Chinese goods to around 47% from 57% – another proof that China has the upper hand. This could embolden President Xi to boldly exert his leverage again in the future. In another show of weakness, President Trump told reporters he would go to China in April next year. But Beijing has not said anything about a reciprocal visit by Xi to the U.S.
Xi Jinping has been Donald Trump’s most formidable rival as the White House seeks to impose its will on U.S. trading partners, refusing to bow to the pressure of American tariffs and showing a willingness – and capability – to hit back. And it works like a charm. China is the only country with the economic muscle to reject the U.S.’ bullying, and even launched counterattacks.
This is proven when, despite resistance from Beijing, Trump has repeatedly expressed his admiration for Xi. In his latest negotiation with the Chinese leader, the U.S. president said – “President Xi is a great leader of a great country, and I think we’re going to have a fantastic relationship for a long period of time.” Speaking on Air Force One, Trump said he thinks the U.S. and China will be able to sign a trade deal “pretty soon.”
Still, promises are meant to be broken. Just because Beijing promises to crack down on fentanyl, it doesn’t mean China will aggressively and actively do it. The U.S. has pressed China for years to do more to control the export of chemicals used to make the drug, a synthetic opioid blamed for more than 100,000 overdose deaths in the U.S.
Unless Beijing treats Washington like a friend, which it doesn’t, and proactively arrests suspected producers to cripple the free flows of such chemicals to Mexican drug cartels, more-stringent regulation of the chemicals likely won’t be enough to solve the U.S. drug crisis because Chinese producers could easily alter the chemistry of precursors to get around the rules.
On the contrary, China sees Trump’s willingness to slash the fentanyl-related tariffs to 10% as a sign of both desperation and weakness which Beijing should capitalize as another trump card. For years, Beijing has been dangling the possibility of more cooperation on counter-narcotics in exchange for concessions by Washington, only to pull back its cooperation when ties turn sour.
For the first nine months of the year, China’s exports to the U.S. fell nearly 17% from the same period a year ago. Therefore, the lowering of fentanyl-related tariffs to 10% offers some relief for U.S. importers of Chinese products. That could make China relatively more cost-competitive for sourcing products, offering a win-win solution for both countries’ business community.
Interestingly, while Treasury Secretary Scott Bessent has claimed that China will buy 25 million metric tons of soybeans annually over the next three years, China’s Ministry of Commerce simply said the two sides agreed to expand agricultural trade without providing specifics. Beijing had made similar promises on soybeans and fentanyl during Trump’s first term, but delivered nothing.
By offering a 1-year relief on rare earths ban, Mr Xi appears to give a warning – and an option – for Mr Trump to behave. It was like a yearly subscription to Netflix offered to well-behaved students to enjoy movies at a discounted price. In the event Washington tries to be funny, Beijing can always pull the plug and spark chaos in Wall Street, financial markets, commodities and crypto currencies.
At the same time, however, Mr. Xi also knows how to let Mr Trump claim credits, playing to the U.S. president’s preference for personal rapport by appealing to his domestic agenda, saying that he believed China’s development “goes hand in hand” with the president’s “vision to ‘Make America Great Again.’” This is what makes Trump like Xi, calling him “a great leader of a great country” and a “great friend.”
Make no mistake – the temporary trade truce is extremely fragile. Any progress made on Thursday could easily be destroyed by any deliberate moves on either side that are interpreted as violating the agreement, the same way Hamas and Israel were killing each other after accusing the other party of violating the 20-point peace plan orchestrated by Trump.
A deal struck last month was almost undone when the U.S. provocatively expanded the range of companies banned from accessing U.S. technology, which would have affected many Chinese companies. Beijing then announced its export controls on rare earths in retaliation, prompting Trump to threaten to call off Thursday’s meeting and to impose yet more tariffs on Chinese goods.
If the U.S. had more – or stronger – cards to play than China in the first place, Trump would not have surrendered his concessions. Both Trump and Xi also discussed the conflict in Ukraine, including how China and the U.S. could work together “to get that war finished.” But the Russia-Ukraine War is not Thailand-Cambodia conflict, which Trump easily fixed with a threat of higher tariffs.
China has emerged as Russia’s strongest political and economic backer since Moscow’s invasion of Ukraine. While Trump, who last met Xi in person in 2019 at the Group of 20 summit in Osaka, Japan, acknowledged China was a big buyer of Russian oil, he dares not impose a 50% tariff – including an additional 25% as a penalty for buying Russian oil – on China the same way he did on India.
Unlike his first stop in Malaysia just five days ago for the Asean Summit, where Prime Minister Anwar Ibrahim accorded a glamour and pageantry show for Trump, the U.S. president was noticeably more tense during his meeting with the Chinese leader. China had learned from Trump’s first term, leveraging its chokehold on rare earths, and diversifying its trade partners so it is less reliant on the U.S.
China successfully used the rare earths export controls and a soybean embargo to force the U.S. to lower tariffs. Xi was ready for Trump in his second term and has a powerful weapon in rare earths. China is getting the better of the U.S. in these recent truce negotiations. A comprehensive deal is still a long way to go. This is just a temporary truce to de-escalate the tensions.
Trump said China may buy a large amount of oil and gas from Alaska, but a deal still has to be reached. Trump also said he discussed the export of Nvidia chips with Xi and will speak with CEO Jensen Huang about it. But the discussions did not cover the most advanced Blackwell graphics processing units. Likewise, China’s Ministry of Commerce said Beijing will work with the U.S. to “resolve issues related to TikTok,” though no further detail was provided.
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October 31st, 2025 by financetwitter
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