Presidents Donald Trump and Xi Jinping are meeting for the first time face-to-face since 2019. This pivotal encounter occurs during the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, South Korea, and is expected to address ongoing trade tensions between the United States and China. Both nations are the world’s largest economies, making their interactions crucial for global economic stability.
Impact of the US-China Trade Deal on Global Economy
The US and China collectively contribute to 43 percent of the global gross domestic product (GDP) and nearly half of global manufacturing output. In 2024, their bilateral trade reached approximately $585 billion. A breakdown in this relationship could lead to severe consequences for global economic growth.
Trade War Risks and Global Consequences
A full-blown trade war between the US and China poses significant risks. The World Trade Organization has warned that a shift into two distinct economic blocs could reduce global GDP by nearly 7 percent in the long run. Geopolitical analysts emphasize the critical nature of US-China relations.
- Heiwai Tang, director of the Asia Global Institute, highlighted that any reduction in tensions benefits not only the two countries but also smaller economies reliant on trade.
- Trade dynamics could involve the US lowering tariffs in exchange for increased Chinese purchases of agricultural products like soybeans.
Recent Developments and Responses
In recent weeks, tensions escalated with China threatening export controls on rare earth minerals essential for various technologies. In retaliation, Trump proposed a staggering 100 percent tariff on Chinese goods. These aggressive measures are viewed as leverage in the trade discussions.
Economists warn that if enacted, these tariffs could have disastrous effects on both economies and the global marketplace. However, there is a prevailing belief that these economic tools may serve more as pressure tactics rather than actual implementations.
Outlook of the Trade Negotiations
Leading up to the Gyeongju summit, US officials indicated a desire to de-escalate tensions. US Treasury Secretary Scott Bessent suggested that both sides might agree to defer aggressive trade measures.
Rolf J Langhammer, a researcher at the Kiel Institute for the World Economy, emphasized that reducing conflicts in trade and technology wars is crucial for maintaining global economic stability. This stabilization could encourage investors to adopt a more constructive outlook amid uncertainty.
Future Trade Relations
Despite the potential for a temporary alleviation of tensions, experts view the long-term prospects for US-China relations with skepticism. Jacob Gunter from the Mercator Institute for China Studies expressed concerns about fundamental differences in the economic models of both nations.
- China’s state-led investment model contrasts sharply with the US’s capitalist approach.
- Both countries may struggle to reach a deal that satisfies their respective interests without significant compromises.
The upcoming discussions are essential for shaping the future of not only US-China relations but also the broader landscape of global economic interactions. The outcomes of the Gyeongju meeting may have lasting impacts on economic stability worldwide.
