A Deal Between Equals

Implications of the Trump-Xi deal in Korea

I packed a lot into this ten-day trip to China that was split between Shanghai and Beijing. I spoke at two public conferences, one private conference, held seminars at two leading universities, had meetings with senior Chinese officials, and caught up with several good friends and former students. “Unforeseen engineering requirements” have delayed the second leg of my return flight, giving me some time in a gushy Cathay Pacific lounge in Hong Kong to pull my thoughts together before heading back to JFK.

The trip ended on a constructive note — yesterday’s well-telegraphed deal struck in South Korea between Presidents Trump and Xi. Never mind that the 90-minute meeting was probably the shortest US-China leader-to-leader summit on record. After all, the in-person agreement was carefully scripted by negotiations a few days earlier between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng on the sidelines of the ASEAN summit in Kuala Lumpur.

I was in meetings with government officials when the broad outlines of the deal started to trickle out and had the opportunity for more in-depth discussions with Party officials over a lavish banquet dinner. Admittedly, this was instant feedback, but three points from my conversations struck me as particularly important:

First, the Chinese are quite proud of having struck a deal from a position of strength. They have been deeply offended by what my dinner companion called the “unnecessary, unjustified, and dangerously aggressive” tariffs and sanctions of Trump 2.0. China’s counter measures on rare earths export controls, following earlier actions on diverting soybeans purchases away from the US to Brazil, were justified as teaching the US an important “strategic lesson” in this trade and technology conflict.

As an editorial aside, I would add that is very much in keeping with my basic framework of codependency that I have long used as a key diagnostic tool in characterizing the US-China relationship. This is at odds with the Trump-Biden view of a one-way dependency of China on the Unted States that effectively permissioned us to go after China without fearing serious repercussions for our actions. As I have stressed, codependency is not a stable relationship for humans or nations, intrinsically prone toward conflict escalation when one partner changes the terms of engagement. 2025 is turning out to be a year of codependency in action.

Second, while the Chinese breathed a sigh of relief over the apparent truce between the two superpowers, they were suspicious over how long it might last. They don’t understand how we can have a president who is so volatile and changes his mind so quickly. They draw a sharp contrast with what they call the steady principled views of their president. The case of Canada simply blows the Chinese away; one asked me how can we slap an additional penalty tariff premium on our closest ally for a television commercial that angered a short-tempered Donald Trump?

Another editorial aside: I clearly didn’t have an answer for the embarrassing Canada question. It just points out the dangers of relying too much on personalized diplomacy, especially when thin-skinned leaders operate on the basis of ego rather than rational analysis. I also underscored the lesson of 2017 when two glitzy summits — one in Mar-a-Lago and the other in Beijing’s Forbidden City — were followed immediately by the onset of the tariff war in 2018. I have looked carefully at 22 US-China leader-to-leader summits since 1972, and most (other than Mao-Nixon in 1972 and Deng-Carter in 1979) have accomplished very little. Keep that in mind when Trump heads to Beijing next April and when Xi returns to the US later in the year.

Third, the Chinese were puzzled at the lack of progress on what has become the core issue of the technology conflict — America’s advanced semiconductors that currently hold the key to breakthroughs in artificial intelligence. Trump’s line on Air Force One after the October 30 meeting with Xi was a surprising punt — something like “that’s between Nvidia and the Chinese.”

A final editorial point: As I wrote last week, I was disappointed that consumer-led rebalancing was ranked number three on the priorities of the Party’s recent Fourth Plenum — and apparently in the upcoming 15th Five-Year Plan — behind industrial deepening (at number one) and indigenous innovation (number two). In discussions with the Chinese yesterday they put my concerns in context: Consumption, they argued, is obviously very important, but technology and innovation are “matters of life and death.” The subtext is that the Chinese have become used to under-consumption but feel that their very future is on the line when it comes to technological advances.

All in all, both leaders clearly wanted to put a halt to the recent worrisome trajectory of conflict escalation. That is most assuredly good news … for now. But I wouldn’t take that conclusion to the bank as a portent of what lies ahead. The US has a president who is eager to put another notch in his deal belt. China has a president who is determined to stay with a rejuvenation strategy that he has been stressing for nearly thirteen years. That strategy now frames China’s co-equal bargaining leverage with the United States in a very different light. The end game of US-China conflict resolution remains a distant possibility.