The APEC Reckoning: Trade War Armistice between Trump and Xi

Leaders of the Asia-Pacific Economic Cooperation (APEC) forum concluded their annual summit in Gyeongju, South Korea, following the most significant breakthrough in global trade tensions seen in months. Specifically, US President Donald Trump and Chinese President Xi Jinping, meeting on the sidelines of the summit, agreed to temporarily de-escalate their simmering trade war. This crucial agreement provided immediate relief to global markets and supply chains that have been battered by tariffs and export controls. However, the truce is widely seen as a pause rather than a complete resolution. Consequently, the spotlight quickly shifted to President Xi, who used the main APEC summit to position China as the new champion of global free trade in Trump’s notable absence. Trade War

The High-Stakes Summit: Optics and Substance Trade War

The APEC summit, which represents $21$ Pacific Rim nations, was heavily overshadowed by the pre-scheduled, high-stakes meeting between the leaders of the world’s two largest economies. This one-on-one discussion was held in Busan, South Korea, just before the main APEC proceedings. The talks lasted approximately $100$ minutes. Furthermore, President Trump emerged, declaring the meeting a resounding success—a “12 out of 10,” in his hyperbolic phrasing. He immediately departed South Korea afterward, leaving the final days of the APEC summit to the other $20$ leaders.

Key Terms of the Fragile Truce

The core of the Trump-Xi agreement centered on rolling back recent escalations and resuming critical trade flows, thus preventing an imminent, devastating tariff hike Trump had previously threatened. The key outcomes included:

• Rare Earth Controls Paused: Crucially, China agreed to suspend its new, strict export control measures on rare earth minerals and magnets for one year. These minerals are vital for high-tech manufacturing, including electric vehicles and defense systems. In exchange, the US agreed to pause its expanded Commerce Department blacklist targeting Chinese-linked tech firms for a year. This temporary solution buys both countries time.
• Tariff Reduction and Fentanyl: The US agreed to cut its $20\%$ tariff on Chinese goods related to fentanyl precursor chemicals in half, reducing the rate to $10\%$. This reduction lowers the overall average US tariff rate on Chinese imports. China, in return, pledged substantial cooperation in stopping the flow of illicit fentanyl and its precursor chemicals into the United States.
• Soybean Commitment: Furthermore, China committed to resuming large-scale purchases of American soybeans. Specifically, the deal reportedly includes a promise to purchase $12$ million metric tons of soybeans in the current marketing year. This measure provides a much-needed lifeline to American farmers, who had been significantly impacted by the trade dispute.

Therefore, the agreement serves as a one-year pause in the escalation, meaning that trade hostilities have temporarily cooled, but the deeper structural issues remain unresolved.

The APEC Stage: Xi Takes the Center Trade War

With President Trump absent from the main APEC meetings, Chinese President Xi Jinping effectively took center stage. He used the summit as a platform to advocate for global cooperation and multilateralism, a move that sharply contrasted with the US “America First” protectionist approach. Trade War

• Champion of Free Trade: Xi told the assembled APEC leaders that China would support global free trade and supply chain stability. He argued that “Investing in China is investing in the future.” This rhetoric positioned China as the predictable and reliable economic anchor of the region.
• Bilateral Diplomacy: Moreover, Xi engaged in a whirlwind of high-level bilateral meetings on the sidelines. He held talks with the Japanese Prime Minister, the Canadian Prime Minister, and the South Korean President, thereby addressing long-standing friction and demonstrating diplomatic engagement across the region. In contrast, Trump’s early departure and reliance on his Treasury Secretary reinforced his dismissal of multilateral forums.

Global Reaction: Relief, But Lingering Caution Trade War

The global reaction to the trade truce was one of immediate, cautious relief. Markets breathed a sigh of relief that the trade war would not immediately escalate. However, experts universally viewed the agreement as a temporary measure.

• Status Quo Not Restored: It is important to note that the deal does not undo all the damage. Tariff levels remain significantly higher than they were before Trump’s return to office. Consequently, the underlying US-China rivalry—over technology, industrial dominance, and geopolitical influence—has not been resolved.
• Weaponization Remains: Furthermore, China’s willingness to use its rare earth mineral processing monopoly as a bargaining chip signals that the weaponization of supply chains remains a strategic threat. This leverage means the US and its allies must continue to accelerate investment in domestic and friendly alternative supply chain capabilities.
• A Win for Stability: Nonetheless, the one-year pause offers crucial stability for global manufacturers and commodity markets. The resumption of soybean purchases is a substantial win for the American agricultural sector. Therefore, the APEC meeting’s success lies not in solving the trade war, but in preventing it from collapsing the global economy in the short term.

The APEC Declaration: Commitment to Cooperation Trade War

Despite the intense bilateral focus, the APEC leaders concluded the summit with a joint statement. The statement avoided explicit language supporting “free and open trade,” but it clearly pledged greater cooperation to overcome shared economic challenges. The leaders reaffirmed their commitment to the Putrajaya Vision $2040$. This $20$-year growth vision calls for a trade environment that is “free, open, fair, non-discriminatory, transparent and predictable.” Therefore, the final declaration affirmed the forum’s purpose, even though the geopolitical landscape remains highly fractured. Trade War

The $2025$ APEC summit will be remembered as the moment the leaders of the world’s two largest economies decided to step back from the brink, consequently allowing the rest of the Asia-Pacific region to breathe. The truce offers a vital window of opportunity for further negotiation. However, the challenge for the world remains: managing the underlying economic rivalry between the US and China in the years ahead. Trade War

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