US-China Trade Truce Offers Temporary Relief as Strategic Rivalry Persists

The United States and China have extended a fragile trade truce, giving the world’s two largest economies more time to manage tensions, but analysts say the agreement has not resolved the broader strategic rivalry between Washington and Beijing.

US President Donald Trump and Chinese President Xi Jinping held a high-profile summit on Friday and agreed to meet twice more this year. Their discussions produced progress on several economic issues, but major disputes remain over trade, technology, Taiwan, defence, rare earths and industrial policy.

“Both leaders would like to see stability in the relationship, at least through the end of the year,” said Daniel Kritenbrink, a former US official who is now with consultancy The Asia Group.

However, he said the truce would need to produce further tangible results if it is to continue beyond the current extension.

Daniel Russel of the Asia Society Policy Institute said that while Trump and Xi were publicly presenting a more cooperative relationship, their countries remained engaged in intense competition across several strategic areas.

The two governments agreed to the trade truce last year during a meeting in South Korea, following a tariff confrontation in which duties on goods between the countries rose above 100% at one stage.

Under the agreement, China committed to increasing purchases of US agricultural products, including soybeans, while also suspending restrictions on exports of rare earths for one year. The arrangement was originally due to expire in November but has now been extended until January 10, US Treasury Secretary Scott Bessent said.

US Trade Representative Jamieson Greer told CNBC that Washington viewed such extensions as “compliance periods”. Kritenbrink said US officials believed China was doing enough to preserve the agreement but not significantly more.

“That’s unsustainable over the long run,” he said.

Mary Lovely of the Peterson Institute for International Economics said the shorter extension reflected the US preference for maintaining close oversight of China’s commitments. She said Washington remained concerned about supplies of rare earth magnets and questioned how effective the threat of higher tariffs would be in changing Beijing’s behaviour.

The two countries are also discussing other areas of economic cooperation. Greer said officials had made progress on trade arrangements and were expected to provide more details on Monday. He said Washington wanted to identify certain products that could receive more favourable treatment in future trade.

Greer is due to host G20 trade ministers in Wisconsin next week, where US tariff threats and China’s industrial overcapacity are expected to feature in discussions.

Bessent also said Washington and Beijing had agreed to establish a notification mechanism for potential artificial intelligence threats. Peter Richardson of Counterpoint Research said it could involve a hotline, although determining what incidents should trigger contact could prove difficult.

Kritenbrink said the summit had not reduced competition between the two countries in artificial intelligence, suggesting that rivalry in the technology sector is likely to continue even as trade tensions temporarily ease.