The first "Sino-U.S. Summit" in six years has just begun! Will the Busan negotiations end the destructive trade war?

Chinese leaders and U.S. President Trump met for the first time in six years at the Gimhae Air Force Base in Busan, South Korea, holding a milestone meeting known as the Xi-Trump meeting. This meeting could reshape the tumultuous relationship between the world’s two largest economies and rival superpowers. Issues on their agenda include tariffs and trade imbalances, China’s comprehensive export controls on rare earths, U.S. restrictions on China’s access to American high technology, and China’s role in the illegal fentanyl trade.

The first face-to-face meeting in six years, the Trump-Xi meeting officially begins

(Source: CNN)

The recent meeting between Trump and Xi took place during an international summit. The two national leaders shook hands at a bear traders base in the coastal city of Busan to begin their discussions. There are widespread expectations that the two leaders will stabilize the currently tense relations during the upcoming talks. This is the first face-to-face meeting between the two leaders in six years since the 2019 G20 Osaka Summit. During these six years, China-U.S. relations have undergone a series of significant events, including the COVID-19 pandemic, an escalation in the tech war, and increased tensions in the Taiwan Strait, causing bilateral relations to fall to the lowest point in decades.

The core of these tensions lies in the enormous trade imbalance and the efforts of the United States to ensure national security against a rising China, including expanding restrictions on China's access to advanced American technology (such as advanced semiconductors needed for artificial intelligence). The U.S. trade deficit with China has long been maintained at hundreds of billions of dollars, and the Trump administration believes that this imbalance harms American manufacturing and jobs. China counters that the trade deficit is a result of market choices and that the U.S. should ease restrictions on high-tech exports to China rather than impose tariffs.

For months, the United States and China have been oscillating between escalating conflicts and negotiations. The Trump administration imposed tariffs of up to 100% on Chinese goods, while China retaliated with reciprocal tariffs and restrictions on rare earth exports. This spiraling trade war not only impacts the economies of both countries but also affects the global supply chain, leading to rising inflationary pressures and slowing economic growth. The weekend meeting between US and Chinese trade negotiation representatives indicates that the Xi-Trump summit may reach consensus on the framework for the future development of bilateral relations — but any agreement reached is merely a litmus test in the tricky and tumultuous great power competition between the democratic superpower and authoritarian China.

Analysis of the Ten Core Issues of the Trump-Xi Meeting

The two leaders met at the Gimhae Air Force Base in Busan, facing a series of thorny issues. These topics cover multiple dimensions including economy, technology, security, and geopolitics. A breakthrough or stalemate on any one of these issues could have far-reaching effects on the global situation.

Trump-Xi Meeting Core Agenda List:

Tariffs and Trade Imbalance: The United States demands that China significantly increase imports of American goods, while China requests that the U.S. eliminate tariffs.

Rare Earth Export Controls: China implements comprehensive export controls on rare earths, while the United States seeks to diversify its supply chain.

High-Tech Restrictions: The United States restricts China's access to advanced semiconductors and AI technology, while China promotes independent innovation.

Fentanyl Issue: The United States accuses China of being the primary source of illegal fentanyl precursor chemicals.

Agricultural Trade: Will China's purchase of American soybeans and other agricultural products return to pre-trade war levels?

TikTok Fate: TikTok, a subsidiary of a Chinese company, faces a ban or forced sale in the United States.

Ukraine War: The United States hopes that China does not support Russia, while China emphasizes a peaceful resolution.

Taiwan Strait Issue: The United States supports Taiwan, while China insists on the One China principle.

South China Sea Dispute: China's increasing military confidence in the East China Sea and South China Sea is causing concern among U.S. allies.

Economic Decoupling: How both sides maintain necessary economic ties in the face of competition.

Tariffs and trade imbalances are the most direct issues. Trump promised to take a “tougher” stance on China during his campaign, and quickly imposed tariffs on Chinese goods after taking office. China responded with reciprocal measures, leading to a spiraling increase in tariffs on both sides. Whether this meeting between Trump and Xi can reach a framework agreement on reducing tariffs will be a key indicator of the success of the talks.

China's comprehensive export controls on rare earths are another focal point. Rare earths are essential raw materials for the manufacturing of high-tech products, with China controlling about 70% of the global rare earth supply. China is using rare earths as a countermeasure, posing a substantial threat to the U.S. technology industry. The U.S. is pushing for diversification of its rare earth supply chain, but it is difficult to break away from reliance on China in the short term.

The profound impact of the Xi-Trump meeting on the global economy

Both sides believe that the leaders' meeting is crucial for stabilizing the relationship between the two countries, as they are still working to establish economic ties with each other. If the Xi-Trump meeting on Thursday can achieve such results, it will be a great boon for China, as China hopes to maintain a stable relationship with the U.S. while working to reduce its dependence on U.S. high technology. This is also true for Trump, as his meeting with the Chinese leader will mark an important conclusion to the series of deals he has already initiated in Asia.

From China's perspective, a stable Sino-US relationship is a necessary condition for its economic continuous development. Although China is promoting internal circulation and independent innovation, the US market and US technology remain indispensable in the short term. China needs time to establish a complete domestic supply chain and innovation system, which requires a relatively stable external environment. If the Xi-Trump meeting can reach some form of ceasefire agreement, it will provide China with a valuable strategic buffer period.

From the perspective of the United States, Trump hopes to showcase his diplomatic achievements through this meeting, while also striving for better market access and trade conditions for American businesses. Trump promised during his campaign to “make America great again,” and reaching some form of trade agreement with China would be a concrete manifestation of this commitment. Furthermore, Trump also needs to stabilize US-China relations to avoid further turmoil in the global economy, as this could impact inflation and employment domestically in the United States.

For the world, the outcome of the Xi-Trump meeting will directly affect the global supply chain, trade flows, and investment confidence. If the two countries can reach some form of framework agreement, global stock markets may see a rebound, commodity prices may stabilize, and corporate investment confidence may recover. Conversely, if the talks break down or end without results, the global economy may face greater uncertainty, the trade war may escalate further, and the risk of recession will significantly increase.

Post-Trump-Xi Meeting Developments and Market Expectations

Any agreement reached is merely a touchstone in the tricky and tumultuous great power competition between the democratic superpower countries and the authoritarian China. Under the leadership of Chinese leaders, China's growing military confidence in the East China Sea and South China Sea has caused unease among America's allies in the region. This structural contradiction will not disappear due to a single meeting of leaders, but the Trump-Xi meeting can establish communication mechanisms and crisis management frameworks for both sides.

Market expectations for the possible outcomes of the Trump-Xi meeting include: lowering certain tariffs, restoring some agricultural trade, establishing a high-level dialogue mechanism, and strengthening cooperation on the fentanyl issue. However, in terms of core technology competition, the Taiwan issue, and geopolitical games, both sides are unlikely to reach substantial compromises. Therefore, the Trump-Xi meeting is more likely to be a starting point for stabilizing relations rather than the endpoint for resolving all issues.