US President Donald Trump touted the trade-war breakthrough with China\u2019s Xi Jinping with predictable triumphalism. On Thursday, Trump gushed about an \u201camazing\u201d meeting with Xi, where he agreed to cut China\u2019s tariff to 47%. But the odds that posterity will concur are exceedingly low.<\/p>\n
For one thing, there\u2019s nothing \u201cgrand\u201d about the bargain<\/a> to which Trump and Xi are discussing in the loosest and vaguest terms possible. Specifics, targets, enforcement mechanisms and punishment for non-compliance will all be discussed by US and Chinese trade officials at a future date.<\/p>\n Nothing on the table<\/a>, though, alters the mechanics of a US$659 billion<\/a> trade relationship in any notable way. Face-saving agreements to throttle back on tariffs, buy more soybeans and increase the flow of rare-earth minerals<\/a> are grand on some levels. But narrowing America\u2019s trade deficit with China requires a wholesale remaking of commercial dynamics.<\/p>\n For another, myriad tripwires could \u2014 and likely will \u2014 return Trump and Xi to battle stations. Count the ways things could go awry: China depreciating the yuan; Trump depreciating the dollar; the US economy slowing sharply; either side failing to live up to a deal; domestic political troubles prompting either leader to lash out abroad.<\/p>\n \u201cIt\u2019s good for the world\u2019s top two largest economies to dial down tensions,\u201d says Ting Lu, economist at Nomura Holdings, \u201cbut we believe the superpower rivalry will likely escalate in the future.\u201d As such, he says, global investors are learning to embrace the new normal of \u201ctension, escalation and truce.\u201d<\/p>\n Economist Chang Shu at Bloomberg Economics says, \u201cwe expect the leaders to approve the deal, but whether it will bring lasting relief to markets is less clear \u2014 the new reality for US-China ties<\/a> appears to be one of frequent ruptures and short-term fixes.\u201d<\/p>\n Goldman Sachs economist Jan Hatzius adds that the \u201crecent policy moves suggest a wider range of potential outcomes than appeared to be the case ahead of the last few key US-China meetings. The likely scenario seems to be that both sides pull back on the most aggressive policies and that talks lead to a further\u2014and possibly indefinite\u2014extension of the tariff escalation pause reached in May.\u201d<\/p>\n Of Trump, Ali Wyne, senior US-China researcher at the International Crisis Group, notes that \u201che seems to think of Xi not as an avatar of imperial ambition, but rather as the head of an impressive rival business company.\u201d This means the best-case scenario is for Trump and Xi to \u201cleverage mutual vulnerability as a gateway to mutual restraint.\u201d<\/p>\n Yet Trump\u2019s ambition to curb China\u2019s rise, while understandable, lacks any sense of proportion.<\/p>\n \u201cThe allure of a single, sweeping deal is understandable,\u201d says Patricia Kim, economist at Brookings Institution. \u201cIt offers the promise of clarity in a troubled, high-stakes relationship<\/a>. But history proves that there is no silver bullet. Managing US-China relations since Nixon\u2019s dramatic visit to China in 1972 has not been about grand gestures or chasing some mythical end state.\u201d<\/p>\n Success requires the tough but ongoing work of strategic management \u2014 balancing competition and cooperation, setting firm boundaries and constantly recalibrating to protect US interests.<\/p>\n \u201cFor decades, both the United States and China have sought an elusive, all-encompassing agreement \u2014 one that would, in a single stroke, resolve their fundamental disputes,\u201d Kim notes. \u201cTime and again, both sides have been disappointed. The reality is that many of their core demands are irreconcilable.\u201d<\/p>\n China, Kim explains, portrays any American pushback as limiting China\u2019s rise and as contrary to free trade principles \u2014 despite \u201cits own egregious track record of state-led economic intervention and coercive trade practices.\u201d <\/p>\n For the US, Kim says, a grand bargain would demand the very things China refuses to concede<\/a>: renouncing military aggression against Taiwan and in the East and South China Seas; curbing its non-market policies that have long disadvantaged American businesses; improving its human rights record, and embracing democratic practices at home.<\/p>\n But the real reason Trump\u2019s China trade talks might not matter in the long run is that Xi was readier for 2025 than Trump World realized. After the Trump 1.0 trade war, Team Xi accelerated efforts to pivot trade away from China\u2019s economy. Today, fast-increasing shipments to Europe, Southeast Asia and Global South nations are enabling Xi to navigate around Trump\u2019s tariffs.<\/p>\n Trump\u2019s exploits from 2017 to 2021 catalyzed\u00a0China Inc<\/a> not just to sandbag the export sector but also to increase competitiveness in ways that the Trump 2.0 gang hadn\u2019t noticed, notes Arthur Kroeber, head of research at Gavekal Dragonomics. Chinese exporters now \u201chave plenty of workarounds through transshipment and relocating late-stage production to lower-tariff countries,\u201d he says.<\/p>\n These rules-of-origin-bending transshipments, of course, have painted a target on the backs of several export-geared Southeast Asian economies. Trump pledges to punish countries engaging in the large-scale arbitrage of passing Chinese goods through lower-tariff countries to avoid US levies.<\/p>\n It remains an open question whether Trump will carry through on such threats. But China\u2019s overcapacity is accelerating de-industrialization in parts of Southeast Asia. The heirs apparent to China\u2019s low-cost manufacturing throne \u2014 including Vietnam,\u00a0Indonesia<\/a> and Thailand \u2014 may be seeing their \u201cChina+1\u201d dreams dashed.<\/p>\n Even though exports to the US plunged 27% in September year-on-year, global exports hit a six-month high, climbing 8.3%.<\/p>\n Still, China\u2019s Ministry of Commerce is hardly happy about things. \u201cFor a long time, the US has been overstretching the concept of national security, abusing export control, taking discriminatory actions against China, and imposing unilateral long-arm jurisdiction measures on various products, including semiconductor equipment and chips,\u201d the ministry said. \u201cThe US actions have severely harmed China\u2019s interests and undermined the atmosphere of bilateral economic and trade talks, and China is resolutely opposed to them.\u201d<\/p>\n Trump\u2019s extreme bilateralization of\u00a0trade is a reminder that his\u00a0economic strategies<\/a> are ripped from the pages of the mid-1980s.<\/p>\n The rationale behind\u00a0Trump\u2019s tariff policies dates back to a time when the five most industrialized nations held vast sway over global dynamics: His\u00a0obsession with a weaker dollar is inspired by a deal struck 40 years ago in New York\u2019s Plaza Hotel, an iconic property\u00a0Trump\u00a0owned for a while.\u00a0His\u00a0tax priorities have critics linking them to the \u201ctrickle-down economics\u201d era.<\/p>\n The problem with a\u00a0US\u00a0leader having\u00a0his\u00a0head stuck in 1985, aside from the obvious, is that \u201cMade in\u00a0China\u00a02025\u201d is upending\u00a0the global economy<\/a> now. And at a moment when\u00a0China\u00a0is investing in where it thinks the world will be in 2035. This goes, too, for a Global South that\u2019s increasingly forging its own path \u2014 one that barely factors in where the\u00a0US\u00a0might fit in a decade from now.<\/p>\n \u201cThe world economy is splitting into competing groups instead of a single connected system of\u00a0globalization<\/a> of the 1990s,\u201d says Gilles Moec, chief economist at AXA Investment.<\/p>\n So, despite what\u00a0Trump\u00a0appears to believe, little of what he\u2019s doing with tariffs is going to shrink cross-border\u00a0trade. What\u00a0Trump\u00a0World misses, Moec notes, is that \u201cinstead of bringing production back to the countries where products are used, global companies have been reorganizing their supply chains around groups of countries or clubs with similar values or security concerns.\u201d<\/p>\n Moec adds that \u201cthis rejig is a diluted version of\u00a0globalization<\/a> but can still keep the wheels moving. As long as clubs include both low-wage nations and high-spending economies, the adverse effects of fragmentation \u2013 such as inflation and lower efficiency \u2013 could be mitigated.\u201d<\/p>\n Even as\u00a0Trump\u00a0complains about\u00a0China\u2019s dominance, he\u2019s paving the way for Asia\u2019s biggest economy to grow its influence. Ending US development aid created more space for Beijing\u2019s Belt and Road Initiative (BRI) to expand its colossal infrastructure investment strategy around the globe, particularly the\u00a0Global\u00a0South.<\/p>\n \u201cNone of these people\u00a0has\u00a0any idea of how the world works,\u201d says Stuart Stevens, a longtime Republican strategist whose latest book is titled\u00a0The Conspiracy to End America. \u201cThe world\u2019s greatest power wants to have as little influence as Liechtenstein.\u201d Either by design or inadvertently, Stevens says, Trump era policies are \u201cgoing to give away American power\u201d to\u00a0China\u00a0and Russia<\/a>.<\/p>\n Yun Sun, director of\u00a0China\u00a0programs at the Stimson Center, adds that any \u201cdeterioration of US leadership and credibility will benefit\u00a0China.\u201d<\/p>\n That goes, too, for Chinese assets. Investors and Asian central banks sitting on mountains of US Treasury securities are already concerned enough about Washington\u2019s US$38 trillion debt load and stubbornly high inflation.\u00a0Now it\u2019s time to count the ways Trump\u2019s supposed truce with Xi could unravel in short order, shaking up global markets anew.<\/p>\n Follow William Pesek on X at @WilliamPesek<\/p>\n","protected":false},"excerpt":{"rendered":"US President Donald Trump touted the trade-war breakthrough with China\u2019s Xi Jinping with predictable triumphalism. On Thursday, Trump…\n","protected":false},"author":2,"featured_media":250859,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[148825,64,63,293,99,148826,148827,148828,32781,148829],"class_list":["post-250858","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-2025-apec-summit","tag-au","tag-australia","tag-block-1","tag-business","tag-china-rare-earths-ban","tag-rare-earths-ban","tag-trump-xi-meeting","tag-us-china-trade-war","tag-us-china-trade-deal"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/250858","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=250858"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/250858\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/250859"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=250858"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=250858"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=250858"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}