COMMENTARY:
On October 30, after a high-stakes meeting in Busan, South Korea, U.S. President Trump and Chinese President Xi Jinping announced a one-year truce in their escalating trade war. During the upcoming year, China agreed to scale back restrictions it had imposed on the sale to the U.S. of rare-earth minerals, of which it produces approximately 70 percent of the world’s mined rare-earth minerals and approximately 90 percent of the world’s refined rare-earth minerals. It also agreed to resume purchasing U.S. soybeans. Finally, China agreed to remove sanctions it had imposed on U.S. ship building, in addition to increased port fees for U.S. ships and companies commandeering U.S. ships. China used these measures to hit back at the U.S. as the trade war heated up.
For its part, the U.S. announced that it would cut by half the 20 percent tariffs Trump had imposed on China in an effort to persuade it to reduce fentanyl shipments to North America. This will decrease import tariffs on Chinese goods from 57 percent to approximately 47 percent. Trump also announced that during negotiations, China had agreed in principle to crack down more on fentanyl shipments. Both sides agreed to extend for a year an agreement currently in place to halt higher reciprocal tariffs. The current agreement was to expire on November 10.
Upon announcing the agreement, the Trump Administration called it a “massive victory.”
It is extremely hard to see the one-year truce this way. For its part, China received a reduction in tariffs in exchange for resuming rare-earth sales to the U.S. and purchasing its soybeans, both of which it was doing before Trump ramped up the trade war. During the upcoming year, the U.S. is assured that it can buy rare-earth minerals and that its soybean farmers can again sell their crops to China – both of which it was doing before the latest twist in the trade war. As for the suspension of reciprocal tariffs for another year, this agreement was already in place. What transpired was a return to the status quo, not a massive victory for either side.
However, the newly announced truce is good, and time will allow tempers to cool off and egos to be reined in. If the upcoming year is used wisely and productively, a stronger, less punitive trade relationship can be forged between the two economic behemoths. It is critical that the U.S. contemplate possible scenarios with China during the upcoming year to make sure we have a solid strategy in place, something that obviously does not exist at present. At the end of one year, if progress has not been made on a fair-trade relationship that both sides can agree on, we undoubtedly will return to the status quo, which is a day-to-day relationship in which one side fires salvos via tariffs or restrictions and the other side retaliates in kind. In other words, the year will have done us no good and at its end the trade war will again escalate.
The Trump Administration must make its position clear on what it wants in its trade relationship with China. It is obvious that it cannot bully this country around without getting bloodied itself. Tariffs have not worked, and China readily fights back hard with its own weapons. If they had worked, China would have scampered to the negotiating table to offer concessions. The opposite happened, and it simply gave back what it took away in the last few weeks. In fact, upon viewing video footage after the announcement, President Xi looked like a man full of confidence that he stood eye-to-eye with the world’s largest economy and did not blink.
On the other hand, Trump has to come back to the U.S. and sell what transpired in Busan to the American people. Other than what was given back to the U.S. by China, a big win for Trump was his announcement that China agreed to step up the enforcement of fentanyl shipments. How is this exactly going to be enforced? Moreover, how is this objective going to be measured? Did Xi simply provide Trump with what he wanted to hear, but will not enact any substantive actions on this issue?
From Trump’s standpoint, it is well worth trying to reshape the U.S.-China trade relationship. In the past, China has subsidized its domestic industries, which allows its companies to use cut-throat pricing in foreign markets, thus driving out competition. It also has legally and illegally forced U.S. companies to provide it with their intellectual property secrets if they want to do business in China. It has used punitive restrictions on U.S. goods that it wants to keep out of the country in order to avoid competition with local industries.
These are all issues that the U.S. must address with China in a comprehensive strategy. Tariffs, restrictions, benchmarks, and diplomacy are all elements that could be incorporated into a successful China strategy. The year-long truce could be the best thing that the Trump Administration has negotiated with China to date, which will give it time to operate. If at the end of a year the U.S. does not have a solid trade strategy with China, we can expect more of the same of what we have been experiencing in 2025.
Jerry Pacheco is the president of the Border Industrial Association.
Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.