Although President Trump’s unorthodox negotiating style has been pointedly compared to a “bull in a china shop,” last week in China he seemed more like a calm cow in a field. The entire world breathed a sigh of relief after the US-China summit as neither Trump nor Chinese President Xi Jinping escalated the ongoing trade war between the two nations.
However, among global leaders, executives and consumers, many questions remain. Yesterday I asked 35 Chinese CEOs whether the summit deserved a “12” on a scale of 1 to 10. Only two agreed. When analyzed from all possible angles, the meeting revealed two main narratives.
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On the one hand, engaging constructively is a positive step, albeit a small one. Goldman Sachs CEO David Solomon highlighted this on Fox Business. He highlighted the importance of the leaders of the world’s two largest economies meeting in person to reach “a more constructive place than we have been in recent months”.
Solomon said he doesn’t believe there will be a “decoupling” but said the U.S. needs a new policy to deal with China’s long-standing market manipulations.
On the other hand, virtually no progress has been made with China since Trump took office, despite all the drama. Derek Scissors, an economist at the American Enterprise Institute, took the more pessimistic interpretation on CNBC.
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He argued vehemently that “the meeting itself was a waste of time” and explained that “US politics is pretty much where it was when Trump took office.”
Both are right. But the meeting was far more significant than these views allow — and not just because the threat of a 100% U.S. tariff or China’s control of rare earths exports was averted.
The key point is that the Trump–Xi summit revealed the limits of Trump’s tariff war and showed that a long-term solution is far from achieved.
Trump, famous for his intimidation tactics, knows well that there is only one practical response to a bully: collective action. The Trump administration frequently claims that the US has great influence on global trade because it is the world’s largest consumer.
But what is often not said is that the world depends more on Chinese products than on American consumers. With this advantage, Xi has forced countries to accept subsidized products from China, pressured companies to give up intellectual property and shunned unwanted foreign competitors.
While Trump is great at fighting collective action, he has proven incapable of building it. Its “tariff gust” has made it impossible to form a strong consensus to respond to China’s predatory practices. So who is the bully and who is being bullied?
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Abuse of fees for personal crusades
Trump has abused the power of tariffs — supposedly to promote economic security — by using them as a weapon to settle personal disputes or take advantage of weaker nations.
Last week, the president imposed an additional 10% tariff on Canada after the country aired a controversial but true and costly TV ad during the World Series.
In response, the Wall Street Journal editorial board criticized Trump’s actions, calling them a “tantrum” and accusing him of “using Reagan’s business beliefs in vain.”
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The editors clarified: “Trump is wrong about Reagan’s speech, and he was also wrong to say on social media that ‘Ronald Reagan LOVED tariffs for national security and economic reasons.’ Reagan was a supporter of free trade.”
In July, Trump imposed an additional 40% tariff on all exports from Brazil unless the country halted legal proceedings against former president and Trump ally Jair Bolsonaro.
South Africa has received hefty tariffs because of what Trump considers “misconduct against white farmers” and discriminatory land reform policies.
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Similarly, in September, at a meeting of CEOs at Yale University in Washington, 82% condemned the US use of tariffs to interfere in the internal political affairs of other countries, as in the Bolsonaro trial.
Furthermore, small fragile nations such as Lesotho and Laos have also been hit by indiscriminate and predatory tariffs.
This abusive use of tariffs does little to convince potential international allies to endure economic hardship in opposition to China.
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With an unpredictable president, the risk of being abandoned by a selfish ally now seems greater than dependence on a country with which they are not in a bizarre trade war.
About 60% of respondents denied that their domestic investment decisions would be encouraged by Trump’s tariff policies, and 71% consider them harmful.
Uncertainty for companies and consumers
The uncertainty caused by the tariffs has slowed economic growth and harmed the industrial base of traditional U.S. allies, making them more vulnerable to Chinese coercion. Those hoping for more stability after the summit were disappointed.
Rare earth export controls have been suspended for just one year — until the agreement frays again — which is likely given that access to critical minerals depends on Chinese access to U.S. semiconductors.
Trump has already ruled out the possibility of China obtaining more advanced chips, but said the US will act as a mediator in negotiations between Nvidia and China.
US port tariffs on China’s maritime, logistics and shipping industries were also temporarily suspended, although they were initially part of a broader strategy to revitalize the American shipping sector.
On the other hand, China agreed to buy “large quantities” of soybean meal and other agricultural products from the US and to cooperate to stem the flow of fentanyl into the country.
However, when analyzing the numbers, Beijing promised to only buy the same average quantity as the last five years. Similar promises were made during Trump’s first term — and did not materialize.
In fact, the Office of the US Trade Representative launched an investigation into apparent Chinese non-compliance with the 2020 “Phase One Agreement” days before the summit.
“China appears to have failed to meet its commitments regarding non-tariff barriers, market access, and purchases of U.S. goods and services,” the statement said. Five years later, the most recent negotiations have not resolved any of these points — nor have they reached an overall trade agreement.
Economist Derek Scissors was partly right. The US is back to its pre-Trump situation — only now manufacturing is more expensive, both at home and abroad, and the economies of foreign partners are weaker than they were last January.
The Canadian economy is deteriorating due to the “structural transition” caused by US tariffs, which have “destroyed some of the country’s productive capacity”, according to Bank of Canada Governor Tiff Macklem.
To the south, Mexico’s GDP fell in the third quarter, raising fears of recession, with the mining, construction and manufacturing sectors hit hard.
In Germany, industrial orders stagnated because of tariff uncertainty — an even bigger drop than the pandemic — and the country narrowly avoided a recession. The eurozone, overall, hasn’t fared much better.
Handing over perceived power to China
Trump’s tariffs have given Xi opportunities to publicly reinforce new areas of balance of power between China and the US through retaliatory actions. Rumors about Chinese rise have existed since the Obama administration, but the power unwittingly ceded by the actions of the Trump 1.0 and 2.0 administrations is undeniable.
Trump’s trade war has led China to seek economic self-sufficiency and control of strategic supply chains. Since then, Xi has strengthened Chinese industrial giants such as Huawei, China Rare Earths Group and electric car maker BYD.
While Trump wages economic wars around the world, Xi carries out a diplomatic offensive, presenting China as a stable and multilateral partner — in contrast to an unpredictable, unilateral and oppressive American regime.
As Trump dismantles institutions created to project U.S. “soft power,” Xi expands investments in global infrastructure and academic and political influence in regions such as Southeast Asia, South America, and Africa — all while undermining the United States’ international image.
The Trump–Xi summit revealed a fundamental flaw in American strategy: Trump has started a trade war that the US cannot win alone. Addressing China’s market manipulations requires collective action — something Trump has systematically undermined with his indiscriminate use of tariffs.
Paradoxically, the market distortions that its tariffs attempt to combat—subsidies, intellectual property theft, and forced technology transfers—are the least likely to be resolved due to the collateral damage caused to U.S. allies.
Without offering “carrots” to balance the “stick”, the US runs the risk of isolation and loss of influence. The problem is that when you use a club too much, it ends up breaking — even if it’s an American club.
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