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A fragile pause in U.S.-China trade and tech tensions
Tom Cooney
November 12, 2025
The highly anticipated meeting between U.S. President Donald Trump and China President Xi Jinping marked a de-escalation in the ongoing trade and technology conflict between the global superpowers. It’s a step in the right direction after a long period of instability. Several threatened escalatory measures were taken off the table, yet the short-term nature of the agreement underscores the fragility of the current relationship.
To borrow a boxing analogy, I see the two sides as having gone to their corners for the coming months, but the final bell has yet to ring as they continue to eye each other and strategize in the meantime.
For starters, several positives emerged from the meeting held in South Korea, which was the first in-person meeting between the two leaders since Trump took office in January.
There was a trade truce, resulting in a one-year suspension of the various intensifying trade and technology export actions that each country had unveiled but for the most part not yet implemented. These cover U.S. semiconductor-related export restrictions, strict new constraints on China’s rare earth exports, and port fees that each country charges on the other’s shipping.
Secondly, the deal features a renewed commitment from China to crack down on fentanyl precursor distribution — a move that, if genuinely enforced, could help rebuild a measure of trust and goodwill in a relationship severely lacking in both.
Another notable outcome was the announcement of reciprocal leader visits in 2026: Trump is slated to visit China in April, and Xi is coming to the U.S. in December for the G20 Summit.
Such visits are not ceremonial, particularly in rocky relationships. Just having them on the calendar lends a measure of stability and increases regular dialogue that helps to minimize misunderstandings and mini crises.
I know from firsthand experience that a tremendous amount of work at the Cabinet and sub-Cabinet levels goes into the planning of each visit with the aim of substantive “deliverables” designed to improve relations. During the late 1990s, I was a foreign service officer at the U.S. Embassy in Beijing and an active participant in mutual visits conducted by Bill Clinton and Jiang Zemin, which helped to repair the then-ailing relationship and paved the way for more than a decade of comparatively cooperative relations.
The underlying strategic rivalry remains unchanged
So where are we now after nine months of whipsaw trade friction? In my view, the two giants of the world economy have fought to a near standstill on both tariff and technology controls, and there is no clear path for either side to “win” this trade war.
Both sides have increased tariffs since January, with U.S. rates currently hovering around 47%. This is double the rate prior to January but also not the trade-killing 145% rate unveiled in April nor even the 60% that Trump often threatened as a candidate in 2024.
China’s economic system has proven it can withstand higher tariffs through careful planning ever since the first U.S.-China trade war of 2017–2019. It has been able to reduce its dependence on the U.S. market with increased exports to other countries.
Trade tensions have not impacted China’s equity market, which has surged this year. The MSCI China Index gained 36% for the year through October 31, led by massive gains from some of the country’s most innovative companies, including Tencent, Alibaba and NetEase.
China’s stock market has surged past S&P 500
Sources: MSCI, RIMES. Data as of October 31, 2025.
U.S. and Chinese export controls, designed to place pressure on vulnerable parts of each country’s tech supply chain, have been temporarily set aside. I believe they are far from off the table and could reappear if trust dissipates, momentum is lost or a crisis presents itself.
Key issues to watch in 2026
Moving into next year, I am watching deal compliance, particularly around Chinese commitments on fentanyl controls, renewed soybean purchases and the restored steady flow of rare earth minerals.
On the U.S. side, the administration has committed to roll back certain semiconductor chip controls and introduce no new tariffs. Whether Washington is willing to approve the export of Nvidia’s advanced Blackwell chips — much desired by Beijing — is unclear.
Also, finalizing the parameters of the TikTok divestiture and ownership of the content recommendation algorithm that powers the hugely popular social media app has yet to be resolved.
These issues and more could be discussed in the lead-up to Trump’s expected China visit in April.
Bottom line
Ultimately, the Xi-Trump meeting on the margins of the APEC (Asia-Pacific Economic Cooperation) summit will be remembered as another exercise in top level diplomacy that served to reduce tensions.
I expect transactional deals, marked by steps forward, backward and sideways. I do not foresee any U.S.-China “grand bargain” taking shape and fully expect bilateral friction and competition to persist for at least the next five years. The good news is that managing friction is where diplomacy shines best, and both sides are now at least gearing up for a busy year of diplomatic engagements.
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MSCI China Index captures large- and mid-cap representation across China A shares, H shares, B shares, Red chips, P chips and foreign listings (e.g. ADRs).
MSCI Europe Index is designed to measure the performance of equity markets in 15 developed countries in Europe.
S&P 500 Index is a market-capitalization-weighted index based on the results of approximately 500 widely held common stocks.
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