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Opinion | US-China: What Now?
Opinion | US-China: What Now?
The Trump–Xi meeting at Busan on 30 October 2025 has been described in global commentary as heralding a US–China “reset" or the “G2 reset". In immediate terms, this was a de-escalation. The United States cut the fentanyl-linked tariff from 20 per cent to 10 per cent, reducing the overall average tariff burden on Chinese imports to around 47 per cent rather than the 57 per cent implied by the autumn escalation. China, in return, deferred its new rare-earth export controls, signalled general licensing flexibility on key critical minerals, and agreed to resume large-scale agricultural purchases of US soybeans. However, the agreement is formally time-bound to one year with annual re-negotiation cycles.
Furthermore, defence ministries of Washington and Beijing agreed to reopen military-to-military communications channels to restore basic de-confliction architecture at sea and in the air. In other words, the much-hyped trade deal lowered systemic temperature, but did not restructure the competitive logic of the relationship in any way.
For bilateral relations, the period between 2018 and 2025 saw an evolution from tariff-based coercion to what scholars now term “capability denial". The early US tariffs under the Section 301 investigation opened an asymmetric confrontation, with China initially on the defensive. However, by late 2019 the trade war was already migrating into the technology domain. In Trump 1.0, US controls on semiconductor equipment, advanced compute and chip architectures hardened steadily and were inherited, and then amplified, in subsequent cycles.
Xi's China absorbed those shocks by cultivating redundancy, that is, by diversifying agricultural sourcing away from the United States, expanding state support for domestic manufacturing in strategic sectors and building a credible threat of resource retaliation through rare-earths and other strategic minerals. But, by 2023–25, the trade war was no longer merely a tariff war. It had become a layered struggle where supply chains, data, AI training power, chip design, maritime signalling and input chokepoints functioned as instruments of statecraft. Busan marked a return to tariff language, but only as a temporary pause layered over a deeper, already-entrenched technological and industrial rivalry.
Analysts largely note three over-arching structural pressures that converged and made a tactical pause functional. First, both sides faced cumulative costs. Tariffs and blacklists were increasingly harming domestic constituencies: American farmers and manufacturers on one side; Chinese exporters and input-dependent industries on the other.
Second, leverage had reached diminishing marginal returns. The United States demonstrated that semiconductor access could be denied and policed. China demonstrated that rare-earths remain a credible upstream threat to global manufacturing. Each side had proved the other could bleed. Neither, however, could force a decisive concession.
Third, the absence of stable lines of crisis-management was becoming strategically dangerous. Militaries and coast guards were operating at close proximity in the South China Sea and around Taiwan with almost no robust architecture. A limited truce therefore acted as an insurance mechanism against inadvertent escalation.
The trade deal, at its core, is a highly engineered pause. It is not a reversal of the trade war, nor a reversion to the pre-2018 status quo. Rather, it is a portfolio of very specific, measurable and mostly reversible commitments that include low-hanging fruit political sectors without affecting the techno-strategic competition that has come to define the modern US–China rivalry.
Under the present deal, the tariff adjustment remains the most visible element. Washington's decision to slash the fentanyl-linked tariff from 20 to 10% was framed as a response to concrete commitments from Beijing to stem precursor chemical flows. Yet this is only one narrow bracket inside a much larger tariff architecture, where the average US duty on Chinese goods, in reality, remains close to 47 per cent. In other words, the US did not unwind the tariff war; it tightened one bolt less harshly in exchange for a behavioural concession. The gesture has signalling value, but it doesn't necessarily unwind the coercive power Washington has constructed in this sector.
On China's side, the rare-earth dimension is seen as equally tactical. Beijing has not “opened" the rare-earths market per se, it has merely deferred the next round of export controls and agreed to implement a licensing pathway that allows minerals like gallium, germanium, graphite and other key rare-earth inputs to continue flowing under a monitored regime. This stabilises downstream manufacturing for aerospace, EV batteries, wind turbines and defence electronics. But, the fundamental leverage remains as China retains the latent capacity. Indeed, one could argue that this concession strengthens Beijing's signalling power as the world now has empirical proof that China can disrupt global value chains, thereby making the threat of reinstating controls more potent.
Agriculture, specifically soybeans, is the third plank. Here again, the concession is targeted rather than structural. Beijing will resume purchases of US soybeans in large quantities, including hard tonnage figures for the next several years. This relieves political pain in American farm states, especially in the Midwest. But China's diversification during the tariff war, notably towards Brazil and Argentina, remains a point of caution. This is because even though resumed purchases supplement alternative suppliers, they do not replace them. Analysts see this as a managed re-balancing calibrated to extract concessions from Washington while maintaining sovereign hedging in procurement options.
The fourth dimension is less economic but strategically equally important: the renewal of military-to-military communication channels. This kind of revival of communication channels serves as a crisis-management guardrail. But, it does not alter the fact that the US Navy, PLAN, and coast guards are in increasingly frequent tactical contact in the East China Sea, South China Sea and the Taiwan Strait. Rather, it is an insurance policy aimed at avoiding inadvertent escalation during a period in which trade tensions are temporarily lowered.
Finally, and perhaps most importantly, the trade deal embeds the concept of annual renegotiation. That clause effectively institutionalises uncertainty. It means neither side is treating this as a new equilibrium. The deal is a platform that can be tightened, loosened, or abandoned depending on next year's bargaining power of the two nations and their respective domestic politics. It is designed to keep both parties inside a transactional cycle of periodic concessions rather than inside a rules-based architecture. Thus, the trade deal does not alter the competitive nature of the relationship. It merely stabilises a few select fronts of the rivalry so that both sides can continue prosecuting the deeper game on issues such as chips, AI ecosystems, supply chain sovereignty, maritime signalling and standard-setting. And do this, without the obstacle of possible market panic.
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Hence, the trade deal is a reset only in the sense that it freezes the most destabilising escalation pathways. The decades-long logic of competition rooted in rival chip ecosystems, rival digital rule-sets, rival industrial strategies, maritime deterrence signalling, and increasingly divergent visions of global economic governance, largely remains as it is. The incentives for both Washington and Beijing still point towards selective cooperation for immediate relief, even as the structural contest, especially in technology, continues to define the trajectory of the relationship.
Esha Banerji is presently associated with a premier think-tank in India, specialising in defence, security, and strategic studies. Her research interest and focuses of analysis are defence strategy, geo-economics, foreign affairs, and the implications of Chinese security developments on the region, especially India. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect News18's views.
Source: News18
Related Posts: US China trade reset, US China relations, G2 reset, Busan Trump Xi meeting, US China tariffs, rare earth export controls, military to military communications, technology rivalry
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