As U.S. President Donald Trump and Chinese President Xi Jinping sit down in Beijing on the 14th for the first time in nine years, expectations are building that the two countries will draft new trade rules to limit losses rather than put a definitive end to the U.S.-China trade war.
On the 13th (local time), Reuters cited four people familiar with the agenda to report that the United States and China are considering selecting $30 billion (about 45 trillion won) worth of non-strategic items each and lowering tariff or non-tariff barriers. Former U.S. Trade Representative (USTR) Deputy U.S. Trade Representative Wendy Cutler said at the Asia Society Policy Institute forum on the 12th that "both sides are coalescing around a basket worth $30 billion to $50 billion."
Since its first term, the Trump administration has demanded structural reforms in negotiations with China, calling for overhauls of state-owned enterprises, subsidies, and the export-led model. The goal this time is different. USTR Representative Jamieson Greer said in a Fox Business interview, "This is not a situation where we will change how China runs its economy," adding, "We will optimize bilateral trade to find a point of balance." Greer likened the framework of this deal to an "adapter" that connects the two economic systems. The reading is that tariff and export controls on security-sensitive technologies will remain in place, while the trade balance will be matched in non-strategic institutional sector.
Agricultural products and energy are considered the items most likely to top the agreement. Experts cited soybeans and LNG as the items the two countries can exchange with the least burden. U.S. soybean exports to China fell 75% last year due to the fallout from the tariff war. As a result, the Corn Belt, where soybeans were a main export item and a core base of support for President Trump, took a heavy blow. With the midterms in November, the Trump administration needs results that can move farmers' votes. For Xi, resuming soybean purchases is a card he can play at a bargain price.
The energy card sits on the same board. China imposes a 10% duty on U.S. crude oil, 15% each on LNG and coal, and up to 55% retaliatory tariffs on beef. If some of these are adjusted, President Trump will have cards to present to the energy and livestock industries. From China's perspective, it can deliver visible results to President Trump without touching systemic variables like subsidies, state-owned enterprises, or industrial policy.
The AP and the Wall Street Journal (WSJ) reported that China could unveil plans to purchase soybeans, beef, and Boeing aircraft together. The United States exported $13.8 billion (about 21 trillion won) worth of aircraft to China in 2017. Last year, due to the tariff war and China's drive to build its own aviation industry, it did not sell a single plane. For Xi, a Boeing aircraft order is seen as a political gift that works for both U.S. manufacturers and President Trump. However, some noted that the gap between the announced value of aircraft contracts and the actual delivered amount must be clearly identified. According to the WSJ, the fulfillment rate of purchase commitments under the Phase One trade deal concluded during Trump's first term came in below 60%.
The real weight of the negotiations is likely to fall on item groups that do not surface. A prime example is the roughly 2,200 items subject to the 7.5% tariff imposed during the first phase of the trade war in 2019. Flat-screen TVs, Bluetooth headphones, bedding, multifunction printers, and shoes are included. Most are everyday goods that directly affect U.S. consumer prices. President Trump faces the task of easing inflation pressures while avoiding criticism that he "gave in to China."
These tariffed item groups are seen as an area that can satisfy both demands at once. If negotiations over this group are concluded, the 10% temporary global tariff under Section 122 of the Trade Act, which expires in July, can be settled together. For China, it appears to be a chance to ease the squeeze in manufacturing. For this reason, experts predicted the two countries will focus on crafting a negotiating plan for the roughly 2,200 items subject to the 7.5% tariff—such as headphones and printers—rather than on advanced semiconductors or electric vehicles. Ryan Hass, a Brookings Institution fellow, told the WSJ, "There are no rosy expectations for a grand bargain or transformation in the relationship."
Public attention is fixed on semiconductors. On the 13th, Trump said on Truth Social that Nvidia CEO Jensen Huang had joined the delegation heading to Beijing. Huang's accompanying the trip to China is taken as a signal that semiconductors will be raised in this meeting.
However, the negotiation landscape between the United States and China over semiconductors remains complex. The Trump administration has already conditionally approved exports of the H200 to China. But it must undergo third-party performance verification, and procedures preventing diversion for military purposes must be demonstrated. At the time of approval, President Trump even proposed a plan for the U.S. government to take 25% of the revenue from the shipments to China. However, China's customs has effectively blocked the import of the H200 and issued guidance to domestic tech companies not to buy it unless absolutely necessary, and as a result, not a single H200 has been sold in China.
If the United States tightens the noose with semiconductors, China counters with rare earths. China controls more than 90% of the world's rare earths. If China blocks exports of rare earth metals and permanent magnets, the United States will see production of key parts for aircraft, semiconductors, and automobiles shaken. President Trump has repeatedly shown a willingness to sell the H200, and China is using that as a bargaining chip to secure larger concessions. Former U.S. Commerce Secretary Wilbur Ross said in an AP interview, "The idea that China can be totally independent of us and we can be totally independent of China is a fiction," adding, "We have to coexist in some way, and the question is what the rules will be."
Outside the economic agenda, Iran and Taiwan are seen as variables that could shape the course of the talks. The WSJ summarized the core agenda of the meeting as trade, Iran, and Taiwan. President Trump is said to want China to wield influence to end the Iran war and stabilize the Strait of Hormuz. Conversely, analysis suggests Xi is likely to demand a reduction in U.S. arms sales to Taiwan and a recalibration of diplomatic rhetoric. Wei Liang, a professor at the Middlebury Institute of International Studies, told Al Jazeera, "With the United States busy with war and Trump's approval rating low, now is the best time for Xi to negotiate."