On Thursday, October 30th, the meeting between U.S. President Trump and Chinese Communist Party leader Xi Jinping in South Korea led to a temporary ceasefire in the ongoing trade war between the two countries, stabilizing the U.S.-China relationship in the short term. However, analysts point out that the underlying issues of the trade war remain unresolved. Both sides are using this temporary ceasefire to reduce their mutual strategic dependencies.
In order to avoid further escalation of the trade war, both the U.S. and China made concessions to each other during this meeting. China agreed to resume purchasing American soybeans, temporarily lift the one-year export restrictions on rare earths, approve the transfer agreement of TikTok’s U.S. business under ByteDance, and commit to preventing fentanyl and its precursors from entering the U.S. On the other hand, the U.S. agreed to reduce the 20% tariffs on Chinese goods related to fentanyl to 10% and temporarily suspend a provision that expanded export restrictions on Chinese companies on the Commerce Department’s blacklist. However, the discussion between Trump and Xi did not touch upon Nvidia’s flagship artificial intelligence chip Blackwell or the Taiwan issue.
Despite the agreements reached between Trump and Xi, the United States continues to be concerned about issues such as China’s industrial policies, manufacturing overcapacity, and export-driven growth model that have not been resolved.
For those eager to get rid of the recent months of U.S.-China trade conflicts and widespread uncertainties in the market, the outcome of the meeting between Trump and Xi is difficult to be seen as a long-term solution. Instead, it appears more like a temporary truce in the ongoing power struggle between the two countries.
According to Bloomberg, Robert Lighthizer, who served as the U.S. Trade Representative responsible for China trade negotiations during Trump’s first term, told Bloomberg TV during the Trump-Xi meeting, “I don’t think you will see decoupling, but I think you will see strategic decoupling.”
“This (U.S.-China agreement) will only last a few months, maybe about a year,” he added, “After that, we will return to square one and reexamine it.”
President Trump, on his way back to Washington after the Trump-Xi meeting, expressed a similar view. “We have now reached an agreement, and we will renegotiate this agreement every year,” Trump told reporters aboard Air Force One. He also added that he expects this agreement to routinely be extended.
Both the U.S. and China aim to leverage this temporary ceasefire to gain more time to reduce their dependencies on each other. Recently, the Trump administration has been expanding the sources and investments in rare earths. During his Asia trip, Trump signed key mineral agreements with Thailand and Malaysia, strengthened relations with key allies like Japan and South Korea in the shipbuilding and rare earth sectors, thereby gaining a more advantageous position for negotiations with Xi Jinping a year later, as reported by Bloomberg.
On October 20th, Trump and Australian Prime Minister Albanese signed agreements on rare earths and critical minerals. Australian Treasurer Jim Chalmers stated before meeting with White House National Economic Council Director Kevin Hassett in Washington on October 16 that Australia is in a very favorable position to meet global rare earth demand.
“We will work with partners to ensure that we can become a very reliable supplier to meet the critical mineral needs of the United States and other global markets,” Chalmers said.
Australia boasts the fourth-largest rare earth deposits globally and has a long history of rare earth extraction, making it a viable alternative source for China’s rare earth supply. Australia is also home to the headquarters of the only non-Chinese heavy rare earth producer.
Furthermore, the Trump administration has been holding discussions with Brazilian mining executives to address the rare earth issue.
At the same time, Beijing is attempting to reduce its reliance on crucial American technology. The Communist Party of China’s recent five-year plan is primarily focused on achieving breakthroughs in key technologies, particularly in the field of advanced chips. However, given past experiences, this goal seems challenging to achieve.
Between 2014 and 2024, China successively implemented the “Big Fund Phase I” and “Big Fund Phase II,” with a cumulative investment of over 300 billion RMB. However, as of now, China has not made a genuine breakthrough in chip manufacturing. Chinese companies still heavily rely on foreign suppliers in areas such as chip design software (EDA), manufacturing equipment, and materials, and breaking through these bottlenecks seems distant.
A report by Nikkei Asia in July revealed that a supply chain executive serving major chip manufacturers in China mentioned, “Domestic lithography tools in China are still in a blank state and far from self-sufficiency. Most production lines still use ASML from the Netherlands or Nikon from Japan, even though they are old models.”
The Washington, DC-based think tank Center for Security and Emerging Technology (CSET) released a report in July showing that as of the end of 2024, Chinese enterprises are making slow progress in areas of semiconductor manufacturing equipment such as lithography machines, chemical mechanical polishing, etching and cleaning tools, thin-film deposition, and packaging and testing, and still heavily rely on foreign suppliers.