Trump-Xi Busan summit: Can the US-China trade truce hold?

US President Donald Trump is currently in a meeting with his Chinese counterpart, Xi Jinping, in Busan.

The Thursday (October 30) meeting between the two leaders on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit is taking place after a gap of six years, as the last time the two leaders met face to face was during Trump’s first term.

The meeting began at 11 am in Busan (7.30 am IST), South Korea, a port city about 76 km south of Gyeongju, the main venue for the Asia-Pacific Economic Cooperation summit, reported AP.

Tariffs and flash points

The crucial meeting comes at a time when the two largest economies in the war are currently in the middle of a fragile trade truce. The tariff war between the two countries reignited earlier this month with China announcing that it would impose curbs on exports of rare-earth minerals, crucial components for building defence equipment, including fighter jets.

Also Read: Why a trade deal is not likely to solve all vexing US-China issues

Trump responded by threatening to impose an additional 100 per cent tariffs on Chinese imports and potential curbs on goods made in the US set for China. China warned of “farm countermeasures” against any unilateral actions by the US that can jeopardise its economic interests.

Thaw in US-China ties?

However, in a sign that none of the two countries seek to escalate the ongoing trade war, days ahead of the meeting US officials have indicated that Trump does not intend to make good on a recent threat to impose an additional 100 per cent import tax on Chinese goods, and China has shown signs it is willing to relax its export controls on rare earths and also buy soybeans from America.

Also Read: US, China reach framework for potential trade deal

Speaking to reporters aboard Air Force One on his way to South Korea, President Trump said that he may reduce tariffs imposed earlier on China due to its role in making fentanyl.

“I expect to be lowering that because I believe that they're going to help us with the fentanyl situation. The relationship with China is very good,” said Trump.

‘Three to four hour long meeting’

At a dinner on Wednesday night with other APEC leaders, Trump was caught on a microphone saying the meeting with Xi would be "three, four hours” and he would then go home to Washington.

Officials from both countries met earlier this week in Kuala Lumpur to lay the groundwork for their leaders. Afterwards, China's top trade negotiator Li Chenggang said they had reached a “preliminary consensus,” a statement affirmed by US Treasury Secretary Scott Bessen,t who said there was “a very successful framework."

Also Read: Amid China logjam, Trump signs rare earths deal with Japan’s Takaichi

The anticipated detente has given investors and businesses caught between the two nations a sense of relief. The US stock market has climbed on the hopes of a trade framework coming out of the meeting.

‘Potential collision course’

However cordial the rhetoric, Trump and Xi remain on a potential collision course as their countries vie to dominate manufacturing, develop emerging technologies such as artificial intelligence and shape world affairs such as the status of Russia's war in Ukraine. Trump indicated that he did not plan to bring up issues such as the security of Taiwan with Xi.

Also Read: Trump: Will reach 'fantastic deal' with Chinese President Xi Jinping

For Trump, that pressure comes from tariffs. Right now, China has faced new tariffs this year totalling 30 per cent, of which 20 per cent has been tied to its role in fentanyl production. But the tariff rates have been volatile. In April, he announced plans to jack the rate on Chinese goods to 145 per cent, only to abandon those plans as markets recoiled.

Then, earlier this month, ahead of this meeting with Xi, Trump threatened a 100 per cent import tax because of China's rare earth restrictions.

(With agency inputs)