The High Stakes of the Latest U.S.-China Agreement

Arabian Post

a day ago

Dr Imran Khalid
'We made a great deal with China. We're very happy with it.' So declared President Donald Trump in his familiar tone of triumphant ambiguity on June 11, fresh off what was touted as a breakthrough agreement to restore a trade truce between the United States and China. But if history has taught us anything, it is that 'done deals' in the Trumpian lexicon tend to be either dangerously fragile or conveniently fungible.
The latest accord, emerging from two days of intense talks in London, follows an alarming spiral in trade tensions that had once again threatened to upend global markets and rekindle the tit-for-tat tariff warfare that haunted the latter years of Trump's first term. According to Trump, China has committed to lifting its restrictions on the export of rare earths – materials critical to the global technology and defense sectors – while the U.S. has agreed to a calibrated rollback of punitive measures, including the threatened revocation of visas for Chinese students.
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As ever, the devil is not just in the details, but in their implementation. Much like the May Geneva agreement that this deal purports to reinforce, the London framework is conditional, tentative, and, crucially, subject to 'final approval' by both President Trump and President Xi Jinping. That qualifier alone renders the euphoria premature.
Still, to be charitable, the very fact that Washington and Beijing are speaking the language of dialogue rather than confrontation is an encouraging sign. Following a phone call between the two leaders earlier this month, there appears to be a renewed willingness – albeit under duress – to keep diplomacy afloat. For a world economy battered by uncertainty, this resumption of talks is, if nothing else, a stabilizing force.
Yet, Trump's boastful framing – that the U.S. walks away with a 55% tariff shield while China gets 10% – betrays a zero-sum worldview that continues to inform his trade doctrine. The truth, however, is far less tidy. Tariffs have proved to be a double-edged sword, inflicting damage on American consumers, industries, and allies as much as they have squeezed Chinese exports. The World Bank's recent downward revision of global growth forecasts points to tariffs and unpredictability as 'significant headwinds,' underlining the global costs of such brinkmanship.
Beijing, for its part, has projected a more measured tone. Chinese Vice Premier He Lifeng, in remarks following the London consultations, emphasized mutual benefit, calling on the U.S. to 'honor their words with actions.' The Chinese side welcomed the 'principled consensus' as a foundation for predictability and stability in bilateral economic relations. While Beijing's rhetoric may be couched in diplomatic platitudes, it signals a strategic patience that stands in stark contrast to Trump's performative deal-making.
Indeed, despite facing considerable pressure – both domestic and international -China has remained consistent in its emphasis on dialogue, reciprocity, and multilateralism. It is no secret that Beijing is playing a longer game. From its support for a multilateral trading system to its efforts in promoting South-South cooperation, China has positioned itself as a steady hand amid a turbulent global order.
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In this light, the reestablishment of a U.S.-China economic and trade consultation mechanism should be viewed as more than a temporary fix. It offers a framework through which recurring disputes can be ironed out, interests aligned, and trust slowly rebuilt. Importantly, it provides a venue for strategic communication -something sorely missing during the height of tariff wars in 2018–19.
However, for this framework to bear fruit, both sides must resist the urge to revert to maximalist posturing. The United States must accept that unilateralism – whether in tariffs or technology controls – cannot substitute for a sustainable policy. Likewise, China must be prepared to meet the U.S. halfway, especially on issues of market access, intellectual property, and transparency.
The elephant in the room, of course, is the technological cold war that continues to simmer beneath the surface. While rare earths and tariff percentages dominate headlines, it is the battle over semiconductors and AI supremacy that threatens to define the next phase of U.S.-China relations. Washington's decision to maintain restrictions on high-end AI chips – particularly those from Nvidia- while easing others, reveals both the complexity and the stakes involved.
Beijing, not surprisingly, has responded with innovation. The resurgence of Huawei, once a poster child of American sanctions, stands as testament to China's determination to chart its own technological path. As Huawei's founder Ren Zhenfei put it bluntly this week, China may still be a step behind, but it is catching up – by stacking and clustering if necessary.
In the short term, these dynamics will continue to fuel friction. But in the long term, they offer a compelling reason for structured cooperation. For neither side can afford the costs of sustained decoupling. The global economy – still reeling from inflationary shocks, supply chain disruptions, and climate-induced volatility – desperately needs the world's two largest economies to find common ground.
To that end, the inclusion of Chinese students in American universities, affirmed in this deal, is more than a diplomatic gesture. It is a recognition that people-to-people ties remain a cornerstone of bilateral engagement. Academic exchanges, research collaboration, and cross-cultural education build bridges that tariffs and bans cannot destroy. They plant the seeds of mutual understanding in a landscape too often scorched by suspicion.
The road ahead remains bumpy. Structural trade conflicts persist, strategic mistrust abounds, and electoral politics – particularly in the U.S. – can derail even the most promising of frameworks. But the London agreement offers a glimpse of what is possible when mutual interest outweighs mutual animosity.
This development not only helps stabilize U.S.-China relations but also injects much-needed momentum into the global economy. It serves as a reminder that even amid intensifying geopolitical rivalry, there is still space – indeed, an urgent need – for pragmatic cooperation.
Trump may brand it a win, but real victory lies not in tariffs or trophies, but in the hard, unglamorous work of sustained diplomacy. For now, both sides have stepped back from the precipice. The challenge will be to keep walking forward – together.
Also published on Medium.
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