The View | Trump-Xi summit a strategic turning point in US-China rivalry

Late last month, Chinese President Xi Jinping and US President Donald Trump reached a trade truce in Busan, South Korea, on the sidelines of the Asia-Pacific Economic Cooperation (Apec) summit. Beyond the pre-existing tariffs imposed by the first Trump administration and reinforced by the Biden administration, the current Trump administration will now levy an additional 20 per cent or so in tariffs on China, resulting in an estimated 47 per cent average tariff rate on China.

As part of the truce, the United States reduced the tariff imposed in February over fentanyl flows into the country from 20 per cent to 10 per cent. On a net basis, US tariffs on Chinese products have been rolled back to around the level they were before Trump announced his “Liberation Day” tariffs on April 2.

Despite the leverage it possesses, China has chosen to accept tariffs of nearly 50 per cent from the US. It still cannot buy the most advanced graphics processing unit chips for artificial intelligence from the US. A consortium of American investors are likely to take a controlling stake in TikTok’s operations in the US, and as part of the Busan agreement, the White House says China will resume buying soybeans from the US.

Whether this is seen as a victory for the US or China is a matter of perspective. On a cumulative basis, China faces among the highest tariffs in the world for the US market. The Trump administration has significantly escalated tariffs on China from about a workable 20 per cent to a prohibitive 47 per cent.

However, the additional 20 per cent in tariffs that China is now subject to is not that much higher than that imposed on Japan and South Korea, which both promised huge investments in the US. Beijing has avoided further escalation since April with only limited concessions. Meanwhile, the US has backed down from its several of its containment measures against China.