A Trade Truce, Not Peace: What Trump and Xi Are Really Negotiating

When Donald Trump and Xi Jinping meet in Washington on Sept. 24, the agenda will extend far beyond trade. Rare earths, semiconductors, and artificial intelligence all sit at the intersection of the two countries’ economic and strategic rivalry, while Taiwan and the ongoing wars in Ukraine and Iran add another layer of geopolitical tension.Yet, trade remains the most revealing place to start – not because it is the only issue that matters, but because it has increasingly become the instrument through which Washington seeks to influence Beijing.JOIN US ON TELEGRAMFollow our coverage of the war on the @Kyivpost_official.At the top of Xi Jinping’s list of priorities is an extension of the US-China trade truce, due to expire on Nov. 10. Failure to extend the agreement could trigger a sharp rollback of the tariff reductions negotiated by Washington and Beijing and revive the tariff war launched by the Trump administration in 2025.Neither side is under any illusion that a grand trade breakthrough is imminent. For now, simply keeping the truce alive would amount to a victory for both sides. The question is not whether Washington and Beijing can resolve their broader economic differences, but how long they are prepared to put them on hold.That is where the negotiations become more complicated.According to the Financial Times, China’s priority is to secure an extension of the tariff reductions through the end of Donald Trump’s second term in 2029. The US position is more cautious, with Washington reportedly favoring an extension of just six months to a year. A shorter agreement would allow the Trump administration to preserve tariff leverage as negotiations continue on a much wider range of economic and strategic issues, including rare earths, semiconductors, and AI. Other Topics of Interest NATO Steps Up Intelligence-Sharing Over Russian Sabotage Threat General Alexus Grynkewich said a limited Russian attack on NATO is unlikely but cannot be ruled out. The underlying trade numbers explain why Beijing has little interest in allowing the confrontation to escalate again.The US trade deficit with China fell by 32% between 2024-25, suggesting that the tariff strategy has had a measurable effect on bilateral trade flows. But the numbers also highlight the limits of that strategy. China’s export machine has not been stopped. Instead, Chinese manufacturers have increasingly redirected goods towards other markets, including ASEAN, Europe, India, and Latin America.China’s overall trade surplus reached roughly $1.2 trillion in 2025, and the country remains on course to surpass that record this year. In other words, tariffs may have changed where Chinese goods are going without fundamentally weakening China’s capacity to export.This is the paradox at the heart of the relationship: Washington’s leverage depends partly on China’s dependence on the US market, while Beijing’s response to that leverage is to make itself less dependent on that market.That gives Beijing an incentive to keep access to the vast US market while simultaneously reducing its dependence on it.For Washington, the calculation is different. The administration can point to a narrower bilateral trade deficit, but it also wants tangible concessions from Beijing. The challenge is to extract those concessions without pushing China towards an even more aggressive diversification of its export markets.Energy is one area where the interests of the two sides appear to overlap.In May, Washington and Beijing established a Board of Trade tasked with pursuing reciprocal tariff reductions covering roughly $30 billion of goods on each side. Agricultural and consumer products, energy, and medical devices are among the sectors under consideration.One issue that could receive particular attention is US liquefied natural gas (LNG).China imposed a 15% tariff on US LNG in retaliation for the tariffs imposed by Washington in February 2025, effectively bringing a nascent trade relationship to a halt. Removing that barrier could serve both sides. The US wants to expand its energy exports into one of the world’s largest markets, while China has an interest in diversifying its sources of fuel.LNG therefore offers something that is increasingly rare in the US-China relationship: a potential area of commercial interest in which both sides can claim a benefit from lowering trade barriers.But there may be much less room for optimism elsewhere.Washington still has cards to playThe Chinese delegation may also face new demands from Washington. In August, Bloomberg has reported that the Trump administration was considering an additional 7.5% tariff on Chinese goods aimed at addressing concerns over China’s industrial overcapacity.If implemented, such a measure would complicate negotiations just as both sides are trying to prevent the existing truce from collapsing. It could nevertheless give Washington additional leverage. The administration is seeking visible economic results, particularly greater access for American agricultural exports and new commercial agreements involving US companies.Soybeans are an obvious target. So are high-profile corporate deals, including potential purchases of Boeing aircraft by Chinese airlines. Such agreements would provide the White House with tangible evidence that negotiations are delivering results, especially before the US mid-term elections this November.But tariffs are only one part of the leverage Washington and Beijing are bringing to the table. The same logic is increasingly visible in sectors that sit at the boundary between commerce and national security.Rare earths are a case in point. China’s position in global critical-mineral supply chains gives Beijing leverage over inputs that Washington increasingly regards as strategically important. Semiconductors and artificial intelligence present the reverse problem: US restrictions on advanced technologies are designed not simply to regulate trade, but to constrain China’s access to capabilities that Washington considers strategically sensitive.The significance of these disputes is that economic interdependence is no longer viewed primarily as a source of mutual benefit. It is increasingly treated by both governments as a source of vulnerability – and therefore as a potential source of leverage against the opponent.When trade becomes foreign policyThe clearest illustration of how far this logic has spread may lie outside the US-China trade relationship altogether.On Sept. 18, Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 into law. The legislation gives the president authority to impose tariffs of up to 100% on imports from countries that qualify as major purchasers of Russian oil or gas. It does not automatically impose those tariffs, but it gives Washington a powerful new instrument with which to pressure countries that continue to buy Russian energy. China and India are among the countries most exposed as they are the top two buyers of Russian crude globally.The timing is significant. The law was signed just six days before Xi’s arrival in Washington, and its intended purpose is to increase economic pressure on Russia over its war against Ukraine.That creates a dilemma for Trump.The tariff threat gives Washington additional leverage over Beijing, but actually imposing punitive tariffs on Chinese goods could undermine the very trade stability the administration is trying to preserve. It could also invite retaliation from China and complicate the economic relationship at precisely the moment when both governments are trying to keep their existing truce intact.The value of the Graham Act may therefore lie partly in the threat of using it.The legislation could give the Trump administration another bargaining chip: the possibility of tariffs can be deployed as leverage without necessarily requiring Washington to impose them.The most visible concessions Washington might seek are familiar ones – greater access for US agricultural exports, purchases of American goods, and commercially significant agreements involving US companies.The broader significance, however, goes beyond the immediate US-China negotiations.The Graham Act illustrates how increasingly difficult it has become to separate trade from foreign policy. A law designed to increase economic pressure on Russia over the war in Ukraine can also alter the bargaining equation between Washington and Beijing.A pause, not a settlementThe US and China are not negotiating from a position of trust. They are negotiating from a position of mutual dependence – and mutual distrust.Washington wants to use access to the US market, tariffs, and technology controls as leverage. Beijing wants to preserve access to that market while accelerating the diversification of its trade relationships..The significance of the Trump-Xi meeting will therefore lie less in whether the two leaders can announce another temporary tariff ceasefire than in what that agreement reveals about the relationship underneath it.A renewed trade truce would demonstrate that Washington and Beijing can still manage their competition. It would not demonstrate that the competition itself has been resolved. Both sides have strong reasons to prevent another escalation, but neither appears ready to abandon the economic instruments that give it leverage over the other.The Graham Act makes the point particularly clear. A measure designed to increase pressure on Russia over the war in Ukraine has also expanded the tools Washington can potentially use against China. That illustrates how economic coercion is becoming interconnected across policy areas: trade policy can serve foreign-policy objectives, while foreign-policy conflicts can reshape the terms of trade.The Nov. 10 deadline may therefore produce another pause in the confrontation. The more consequential question is whether Washington and Beijing can turn that pause into a mechanism for managing their rivalry, rather than simply postponing the next round of it.