Trump, Xi cool China-US trade tensions...for now

"China and the United States can jointly demonstrate the responsibility befitting of major powers, working together to accomplish more significant, practical and beneficial undertakings for both nations and for the world," the Chinese leader said in a prepared statement.

Indications that the talks had ended positively were reflected in Trump's announcement that he planned to visit China in April and that Xi would reciprocate with a visit to the US after that. The South Korean meeting between Trump and Xi was the first time the two leaders had met since the G20 summit in Osaka, Japan, in June 2019, when the two countries were also in the throes of a trade war. But despite the encouraging statements from both sides, there was scant detail about any agreements reached between the two leaders.

Tense times

The summit took place amid deepening tensions between the US and China on a range of issues, including trade and Taiwan. One key area of contention has been Beijing's threat to impose export restrictions on the supply of rare earth materials, which are used in the manufacture of a wide range of goods, from mobile phones to military equipment. China is estimated to control 90% of the global market for rare earth materials, and any restrictions Beijing imposes on the supply chain could negatively impact global trade.

Tensions between Washington and Beijing increased significantly earlier this month after China added five more rare earth elements to its control list, as well as the requirement that foreign companies obtain a license from Beijing to use even tiny amounts of Chinese-sourced rare earth materials in their finished products. US officials described that move as an intolerable attempt by China to control global supply chains, and Trump threatened new 100%  tariffs to take effect on 1 November.

According to Trump, the looming crisis over the supply of these critical materials has been averted—for the moment, at least—as a result of his talks with Xi, with the US leader confidently predicting that, "There is no roadblock at all on rare earth. Hopefully that will disappear from our vocabulary for a little while."

Despite Trump's optimism, it appears that Beijing has only agreed to delay its new requirements on these materials for a year, while agreeing to make "substantial" purchases of American farm goods and attempt to curb shipments of fentanyl precursor chemicals to the US, which were also top of Trump's list of demands. In return, Trump says he intends to immediately lower tariffs on Chinese exports to 47% from 57%—a move that should help ease tensions in capital markets around the world.

Crisis defused...for now

At the very least, the South Korea summit should help defuse tensions between Washington and Beijing in a trade war that is arguably not in either country's interest. At one point, Trump's determination to target Beijing over what he argued was an unfair trade imbalance between China and the US led him to impose tariffs as high as 145%, prompting Beijing to retaliate with its own devastating measures on US imports.

This led to a dramatic decline in imports of American farm goods, which fell by more than 50% in the first seven months of 2025. US soybean farmers, who exported a record $18bn worth of their crop to China in 2022, have been hit particularly hard, with just $2.4bn in shipments to China in January through July.

The summit between Trump and Xi, therefore, has helped scale back the trade war, which threatened to disrupt the global economy. But whether a lasting truce can be established between the two leaders on these key trade issues will depend on the outcome of their future efforts to establish a more mutually beneficial trading partnership.