The ‘No Headline’ China-US Summit Was Very Revealing

The big meetup between Presidents Donald Trump and Xi Jinping elicited a big yawn from financial markets and a dearth of economic headlines. Readouts from each side said the parties agreed China would increase imports of US farm products and aircraft, and that they’d establish working groups to facilitate new investment and tariff reductions on “non-strategic” goods. Contentious issues such as export restrictions on Chinese rare earths and advanced US semiconductor technology were left for later. There “may not have been much more to come out of the two days of meetings than the vibes,” Bloomberg News observed.

Even so, the summit told us a lot about the bilateral relationship and what to expect in the months ahead. Little of it is good news for the US side.

First, it’s clear that China has weathered President Donald Trump’s multi-term tariff assault and effectively fought the US to a stalemate. The 2020 “Phase One Deal” was tellingly unbalanced: China made a laundry list of promises — grandiose and detailed purchase commitments, greater market access, regulatory reforms, and more — while the US did almost nothing. This time around, the promised purchases are much smaller and vaguer, while possible future tariff reductions are mutual. China arguably isn’t the United States’ economic peer today, but you’d be forgiven for thinking that based on the summit’s deliverables.

China achieved this draw through several channels. The government responded to rounds of US tariffs with not only tit-for-tat levies on America’s exports, but also efforts to expand economic ties — via trade agreements, diplomacy, regulatory approvals and unilateral tariff reductions — with Europe, Asia, Latin America and Africa. Along with longstanding (and questionable) government support for domestic industries, Beijing bolstered its economy’s resiliency by stockpiling energy and food while investing in infrastructure to encourage trade with non-US markets.

Chinese exporters, meanwhile, sought alternative destinations for finished goods such as solar modules and EVs, as well as intermediate inputs incorporated into “Made-in-Not-China” products – often exported to the United States at lower tariff rates. As a result, declining Chinese exports to the US were more than offset by surging sales elsewhere, and China’s trade surplus exceeded $1.2 trillion last year — a new record. At the same time, Brazil, Argentina and other suppliers have displaced US products in China’s agricultural import mix.

Beijing also deployed asymmetric retaliation, most notably by limiting rare earth minerals and related magnets that US manufacturers need. As most economists will tell you (and as we learned a decade ago), export restrictions can be self-defeating in the longer term, but they cause angst and short-term pain for influential companies and defense contractors — angst that clearly got Washington’s attention last fall. Other asymmetric moves included regulatory and investment delays and denials for US exporters and service providers, most recently Beijing’s decision to block Meta Platform Inc.’s $2 billion acquisition of Singapore-based AI startup Manus.

Trump’s tariff onslaught certainly wasn’t costless for China, but last week’s summit shows that the pain has been sufficiently mitigated via a playbook that few other nations, if any, can copy.

The deals announced were also noteworthy and not for their terms, but for the market’s collective shrug. As usual with US-China summitry, the initial reporting was on the Three Bs: Boeings, Beans and Beef, with both sides announcing billions of dollars in new soybean and aircraft purchase commitments and regulatory relief for US beef and chicken exporters. Yet the market was underwhelmed. Boeing Co. shares declined after Trump said China ordered just 200 jets, well below the 500 investors were expecting and the 300 China promised to purchase in 2017, before trade hostilities first inflamed. Crop prices initially sagged before recovering some to levels still below pre-summit highs.

The market’s ambivalence is warranted, given past Chinese noncompliance. Data from the Peterson Institute show that China came nowhere close to meeting its Phase One commitments to purchase hundreds of billions of dollars in US manufactured and agricultural goods — and imported less than pre-trade war trends would predict. China met last year’s agreed upon soybean target, but that was well below levels hit in 2024 and earlier.

Investors also seem to understand that economic realities have, along with geopolitical thorns like Iran and Taiwan, left both capitals uninterested in escalation. In China, a humming export machine and frontier-level achievements in certain advanced industries mask an economy that’s still bogged down by a Japan-esque property bust, stifling public and private debt, depressed household spending, stagnant productivity, high youth unemployment, and serious demographic headwinds.

The US, meanwhile, is riding an AI wave and strong corporate earnings, but is also battling stubbornly high inflation, its own government debt problems, jittery bond markets, Iran-related supply chain disruptions and persistent consumer doldrums. Both sides still have plenty of weight to throw around, but neither is itching for a big fight. In a welcome — albeit narrow and late — change, they’re actively looking for ways to lower barriers to bilateral trade and investment.

This brings us to the summit’s final lesson: scattershot US trade policy has, coupled with an ill-conceived war in Iran, weakened Washington’s hand on China. Blanket tariffs and related bellicosity have alienated allies and pushed neutral countries like Vietnam closer to Beijing for good reason. Indeed, additional tariff reductions for low-value Chinese imports could make them more competitive than goods from alternative exporters like India, which is precisely the opposite of what US tariff policy was intended to accomplish. And the strategic value of tariffs has been undermined by a series of court rulings against the broadest levies – something US “trade deal” partners have surely noticed.

At home, chaotic tariffs have raised prices for food and other consumer goods while, as aluminum shows, increasing supply chain vulnerabilities and dampening investment for manufacturers. Pledged tariff reductions could have grumpy American consumers asking why we have taxes on “non-strategic” items no matter where they come from. The war with Iran has exacerbated the economic pain all while China’s trade surplus and geopolitical influence have expanded.

This doesn’t mean the bilateral relationship is in a good place overall or that, without Trump’s global tariffs, the US would’ve emerged from last week’s summit victorious — whatever that means. But in a wrestling match between two global heavyweights, every bit of leverage helps, and the Trump-Xi summit showed the perils of carelessly squandering it.