Making the Most of the Trump-Xi Meeting

U.S. President Donald Trump will soon conclude an intensive week of engagements in Asia. On 27 October, at the Association of Southeast Asian Nations summit in Kuala Lumpur, the Malaysian capital, the U.S. inked trade deals with Cambodia and Malaysia and announced frameworks – in effect, precursors to deals – with Thailand and Vietnam. On 28 October, Trump visited Tokyo, where he and newly elected Japanese Prime Minister Sanae Takaichi signed an agreement to deepen cooperation on processing critical minerals. The next day, he went to South Korea, where he and President Lee Jae-myung concluded a trade pact between Washington and Seoul. But the main event of his trip lies ahead: he and Chinese leader Xi Jinping will meet in Busan, South Korea on 30 October, while the Asia-Pacific Economic Cooperation summit proceeds in Gyeongju to the north.

U.S.-China relations have been chaotic since Trump’s return to office. On one hand, Trump has expressed deep respect for Xi, and he has undercut traditional U.S. allies and partners by imposing steep tariffs on them and expressing scepticism of U.S. security commitments in Asia. But while Beijing can only have welcomed these elements of the president’s approach to the region, Trump’s second administration has also adopted a far more confrontational economic policy toward China than his first, arguing that it is necessary for fairer trade. As of 25 September, average U.S. tariffs on Chinese exports were 57.6 per cent – over 20 percentage points higher than they were on 20 January. In September, in addition, the Trump administration expanded the number of Chinese companies on the U.S. Commerce Department’s Entity List (requiring them to obtain licences to receive U.S. goods and services) from roughly 1,400 to over 20,000. While China has engaged in some tariff retaliation, especially targeting U.S. soybean formers, it has mainly countered by restricting exports of rare-earth elements, which are indispensable for the functioning of the global economy. Threatening sweeping new export restrictions on rare earths on 9 October – with an effective date of 1 December – it evoked a sharp reaction from the U.S. and other G7 countries.

Against this backdrop, most observers see the Trump-Xi meeting as an opportunity for the world’s two foremost powers to de-escalate a trade standoff that, despite periodic reprieves, has intensified since early April. Encouragingly, following fresh talks between U.S. and Chinese officials in Kuala Lumpur, U.S. Treasury Secretary Scott Bessent expressed optimism that China would commit to making “substantial” purchases of U.S. soybeans over several years and defer rolling out the new rare-earth restrictions by a year. As they wait to see whether Trump and Xi will bless the terms that Bessent and his colleagues negotiated with their Chinese counterparts, observers of U.S.-China relations will also be monitoring the leaders’ exchange for clues about whether they might move from a tit-for-tat tariff showdown toward a “grand bargain” that could spell a new form of peril.

As recent months have placed in sharp relief, China has an array of economic levers that it can variously pull and let slack to put pressure on the U.S. Unlike in his first term, when Trump merely sought a trade deal with Xi, he now needs one. Perhaps because he underestimated Beijing’s preparation for and capacity to absorb Washington’s escalations, he launched a flurry of major tariff actions during his first few months back in office, resulting in an average U.S. tariff level on Chinese exports of 127.2 per cent as of early May. But Trump’s gambit boomeranged. U.S. soybean farmers typically send about half of their annual harvest to China, and Beijing only in late October made its first purchase of the 2025 season. Trump takes pride in the support that he enjoys in the U.S. agricultural heartland (he won the 2024 vote in all but eleven of the 444 counties that the U.S. Department of Agriculture classifies as “farming-dependent”), and he surely wants to maintain it with the U.S. midterm elections a year away. But while the administration may temporarily keep soybean farmers afloat with a $10 billion bailout that it is contemplating, stopgap measures can only go so far in offsetting Chinese purchases.

Chinese leverage also extends far beyond the U.S. agricultural sector. In early June, just two months after China curtailed its exports of seven rare earths (a prelude to the more expansive regime that it unveiled in October), the U.S. Vehicle Suppliers Association warned the Trump administration that the auto industry would experience “widespread disruption and economic fallout” without the lifting of that restriction. China’s dominance in rare-earths production and processing gives it the capacity to cripple other industries as well – including, critically, those that underpin U.S. arms manufacturing.

Vulnerability, of course, is a two-way street. The centrality of the U.S. dollar in global finance, U.S. dominance in chip-design software production and the importance of the U.S. as a market for Chinese exports (even if a declining one) collectively give Washington significant leverage vis-à-vis Beijing. The question is whether U.S. leaders are right to assume – as Trump, Vice President JD Vance and Bessent have all claimed in recent weeks – that Washington holds decidedly better cards than Beijing. In reality, the two countries’ economic interdependence is far less asymmetric in Washington’s favour than it was during Trump’s first term (the president himself has conceded that the current U.S. tariffs on China are “not sustainable”). Indeed, if the U.S. and China were to go to war today, each would depend heavily on the other’s inputs for its warfighting capacity.

China’s increasingly evident capacity to inflict pain upon the U.S. economy has led some observers – not to mention some of Trump’s own advisers – to worry that Xi might use this leverage to extract not only economic but also security concessions. What might such a deal look like in practice? Xi would likely dangle carrots that aim to appeal to Trump’s U.S. political base. Beyond continuing purchases of U.S. soybeans and postponing more stringent rare-earth export controls, the Chinese leader might offer to invest in U.S. battery plants and crack down more vigorously on the export of fentanyl precursors. (Trump is reportedly willing to halve fentanyl-related tariffs on China should Beijing commit to tougher controls on shipment of those materials.)

In return, Xi might have two core requests. In the economic realm, he would likely predicate China’s taking the aforementioned steps on Trump’s willingness to ease U.S. sanctions, tariffs and export controls, which Washington has been ratcheting up at a time when Beijing is confronting mounting structural challenges to its development. The bigger prize, though, might be in the security domain: Xi is reportedly preparing to ask Trump to state that the U.S. “opposes” Taiwan’s independence, which is China’s brightest red line. Xi would likely frame the latter request as a chance for Trump to steady – and, eventually, reset – the world’s most consequential bilateral relationship. He might suggest that by shifting U.S. policy, the self-styled “peacemaker in chief” would seize an evanescent opportunity to end the prospect of a cross-strait war, transform U.S.-China relations more consequentially than any U.S. president since Richard Nixon and cement his place in posterity as one of history’s most visionary statesmen.

One can imagine that Trump – eager for diplomatic glory and unusually (for a U.S. president) disinterested in Taiwan beyond its role as the leading producer of advanced semiconductor chips – would take the bait. If he does not do so on 30 October, he might contemplate doing so at a subsequent meeting with Xi. While U.S. Secretary of State Marco Rubio has attempted to pre-empt that concern by stating that Trump will not change U.S. policy on Taiwan to secure a trade deal, Chinese and Taiwanese interlocutors alike have reason to question how authoritatively Rubio and other top U.S. officials speak for him on cross-strait policy. Some of Trump’s decisions in recent months – including cancelling a meeting between a senior Pentagon official and Taiwanese Defence Minister Wellington Koo in June, refusing to approve $400 million in military aid to Taiwan over the summer and advising Taiwanese President Lai Ching-te against making a stopover in New York in August – have exacerbated concerns in Taiwan about U.S. credibility. Even if Trump were to decline Xi’s offer for now, the Chinese leader will almost surely extend it again. As the U.S. president gets further into his second and last term – and accordingly becomes more preoccupied with shoring up his legacy – the offer could become more enticing.

Accepting it, however, could undermine regional stability. Since the normalisation of U.S.-China relations in 1979, the U.S. has undertaken a fraught yet successful balancing act between China and Taiwan. The core element of this policy of “dual deterrence” has been ambiguity, aiming to leave both Beijing and Taipei unsure of how the U.S. might react were war to break out over the island – and, therefore, inclined to assume the worst from their respective perches. The underpinning logic is that Beijing would be more likely to refrain from attacking Taipei if it were to believe that Washington would respond forcefully, potentially even jeopardising the Chinese Communist Party’s grip on power. Conversely, Taipei would be more likely to refrain from declaring formal independence – a casus belli for Beijing – if it were to lack full confidence that Washington would support it in any ensuing conflict.

Observers have long focused on the prospect that Washington might upend this delicate balance by embracing “strategic clarity” – which would entail an explicit defensive commitment to Taipei – a decision that could make war more likely by persuading Beijing that a peaceful political settlement of cross-strait tensions is no longer possible. Now, though, the “grand bargain” that Xi may be poised to offer Trump poses a version of the same problem. Were Trump to state that the U.S. opposes Taiwan’s independence, Beijing might move closer to concluding that Washington would acquiesce to a Chinese attack to reclaim what it sees as a rogue territory. Were China to launch such an attack, the political pressure from Congress on the White House to retaliate could far exceed what Trump anticipates, potentially leading to a major-power war of catastrophic proportions. Yet there is little evidence that Trump and his team have given significant thought to the potential consequences of opting into Xi’s preferred version of strategic clarity – let alone undertaken the extensive preparatory work that would be required to manage them.

For now, then, U.S. leaders should strive to reinforce the status quo – fragile but still holding – with its focus on dual deterrence, and steer clear of under-considered policy improvisations. Concretely, the U.S. should continue working to persuade China that it would incur devastating military and economic consequences were it to attempt to invade Taiwan. Part of that effort should involve further bolstering Taiwan’s “porcupine defences”, asymmetric capabilities that would make it painful for China to invade and annex the island. At the same time, the U.S. should stress to President Lai, who has taken a harder line on cross-strait tensions than his predecessor, Tsai Ing-wen, that doing so complicates Washington’s efforts to be supportive of Taipei and plays into Beijing’s coercion. Washington should further ask Lai to incorporate more rhetoric into his policy speeches that nods to – without embracing – Beijing’s “one China” principle, drawing on references to the Republic of China constitution and the Act Governing Relations Between the People of Taiwan Area and the Mainland Area.
 

While Trump should be wary of any deal that could further undercut Taiwan’s security, there is still plenty of potential upside in his 30 October meeting with Xi. A robust dialogue between the leaders of the world’s two most powerful countries is vital, and it has room to deepen in part because of views of Trump’s that are iconoclastic by Beltway standards. He continues to express respect for Xi, for example, and he does not frame strategic competition in the zero-sum, existential terms that characterise much of U.S. commentary. Nor, moreover, contrary to early speculation, does he share the widespread view in Washington that the overarching U.S. foreign policy priority should be outcompeting China. The administration’s forthcoming national defence strategy will reportedly give top billing to defending the U.S. homeland and deterring threats that arise in the Western Hemisphere. (While strategic competition between the U.S. and China is intensifying there, it is most acute in Asia.) Because both Trump and Xi are far more dominant within their respective policymaking apparatuses than they were at the end of Trump’s first turn in the White House, their interactions will likely play a more decisive role in shaping U.S.-China relations during the remainder of Trump’s current term.

What, then, should the two leaders try to achieve on 30 October and during other planned meetings over the coming year? First, they should consolidate and build on the trade détente that their teams negotiated earlier in the week in Kuala Lumpur. They might, for example, contemplate phased, reciprocal reductions in tariffs on each other’s exports to the levels that existed when Trump retook office. They might also authorise their respective teams – with Bessent and U.S. Trade Representative Jamieson Greer executing Trump’s directives, and Chinese Vice Premier He Lifeng and China’s top trade negotiator Li Chenggan carrying out Xi’s – to have a standing meeting each quarter to ensure steady progress to that end, lest the U.S. and China simply drift from one shaky trade truce to another.

Secondly, if they can steady U.S.-China trade ties, Trump and Xi should broaden their talks to broach security issues. The former should concurrently stress his commitment to continued leader-level dialogue and impress upon his counterpart that top administration officials who affirm the strength of U.S.-Taiwan security cooperation and the integrity of U.S. treaty alliances in Asia speak for him (standing aboard the USS George Washington aircraft carrier in Yokosuka, Japan, Trump sent a good message on 28 October by calling the U.S.-Japan alliance “the foundation of peace and security in the Pacific”.) Sustaining a balance of diplomacy and deterrence may not garner him the kind of headlines that he craves, but it would advance the cause of major-power peace. Trump and Xi should also pursue an affirmative agenda where possible, potentially by discussing how the U.S. and China can cooperate to mitigate the growing security risks at the intersection of nuclear weapons and artificial intelligence.

Thirdly, as Crisis Group argued in a report in May, the two leaders should identify steps that could help the U.S. and China pursue a new regional equilibrium – a balance of military power that allows both countries to feel sufficiently assured that their respective core interests are secure. An ambitious effort of this kind would involve considerable preparation and discussion. For now, Trump and Xi could make progress simply by expressing a shared desire to move in this direction. The two leaders might consider opening new channels between their security establishments – and bolstering those that exist – to communicate intentions and red lines more regularly. They might also aim to increase transparency about nuclear policies – and in so doing create the foundation for more robust discussions about conventional, space and cyber capabilities.

If there is any silver lining to the trade standoff between the U.S. and China, it is that each country has gained a greater appreciation of the economic damage that the other can do to it – and of the near impossibility of full decoupling. That understanding builds on another: that, with their conventional and nuclear arsenals, the two powers could devastate each other’s militaries, economies and societies should they mismanage their clashing interests in Taiwan and the South China Sea. The task for Trump and Xi is to harness mutual vulnerability in the service of mutual restraint – especially in Asia, where Washington can no more expect to contain Beijing than Beijing can expect to displace Washington.