On US China Trade Deal: Why China Maintains their Leverage while Kicking the Can Down the Road.

 

By Chinedu Okoye 

Summary:

• Donald Trump and Xi Jinping met last week and reached mild concessions, de-escalating the ongoing trade war. However, analysts note that this falls short of a comprehensive deal.

• President Xi agreed to delay export controls on rare earth metals for a year and resume soybean purchases from the U.S., which had been halted for months amid a shift to Brazilian supply.

• In return, Trump agreed to pause tariffs on Chinese goods for one year, effectively restoring partial access to the U.S. market for Chinese manufacturers.

• The agreement is positive in tone but thin in substance, revealing Beijing’s enduring leverage over Washington.

 

Analyst Assertion:

Trump’s framing of the agreement as a “great deal” is overstated. The disruptions in global trade caused by his erratic tariff policy have merely been postponed, not resolved, and issues largely unresolved.

As Bloomberg analysts observed, instead of creating “a framework for resolving the fundamental differences between the two countries,” the one-year truce merely “suggests a temporary stabilization of relations,” with China maintaining significant leverage over the U.S.

Why Beijing got the Better of the Deal:

Trump took the proposed 100% tarrifs on Chinese goods imposed earlier in the year – but was later paused till the tenth of this month – off the table for an extra year, for Beijing 's delay in “export controls on so-called rare earths critical minerals for a year and revive purchases of US soybeans.”

The latter they already need and are accustomed to, but the former can have exploitable loopholes, in the details. Thus, there remains no serious concession by the People's Republic of China and so no win for Trump, save for the surface level Soybean export increases to their largest customer.

Yet, these moves cost China little. Beijing already needs soybeans and simply returns to previous trade volumes — around 25 million tons per year, in line with the 2013–2023 average of 22.5–30 million, according to Brian Grete, senior grain and livestock analyst at Commstock.

Rare earths, however, are another story. China’s near-monopoly over their mining and processing — essential for semiconductors, smartphones, MRI machines, and even defense applications — remains untouched. The delay in export controls is reversible and leaves enough policy loopholes to retain leverage.

China has a near monopoly on rare earth minerals, and this hasn't changed. So Xi “threw a bone” at Trump full aware of his political appetite for a headline “win” while giving away virtually nothing that alters the power balance.

The Main Points of the Truce, in Line with ZE Earlier Expectations:

Trumps initial and preferred plan would be to was a complete reversal of the policy, but what he got was a delay. And the Soybean imports aren't so significant to either US or China on a grand scale.

Xi basically offered a partial relief with no permanent or long-term concessions, and teased the US President with half wins.

As said before on zero Equilibrium “The Trump administration seems erratic, and foreign governments are more than aware of how quickly things could change with regards policy formulation.”

In the paper it was opined that: “Washington is expected to dial back on its tone regarding isolating China, most probably disguised as a win, through a switch in negotiations strategy..… from Chinese isolation as the goal, to a US favorable trade agreement with no implications for China.”

This has been depicted in the shallow offerings the Chinese President proffered absent any substantial gains for the US. For rae earth metals restrictions where not eliminated but stalled, with the Soybean imports insufficient to move the trade balance needle, as other Chinese imports are no longer restricted for the time being.

Also from another paper "US China Trade War, Winners and Losers, and Implications for the Global Economy", in April, we argued that, “Beijing on the other hand will most likely leverage it's established economic alliances, to consolidate and strengthen economic partnerships that extend beyond trade to investment partnerships and economic cooperation ”

Xi’s speech at the Asian Summit on sustaining production chains fits this trajectory. No structural solution has emerged, but the temporary calm has buoyed financial markets with the NASDAQ hitting new highs.

Still, China remains unshaken. It has reaffirmed its central role in supply chains without altering its strategic course. The Trump administration, meanwhile, fights on multiple fronts, increasingly reactive rather than methodical.

ZE Final Remarks and Takeaway:

• This truce is more about optics than outcomes. Beijing traded time for influence; Washington traded tariffs for headlines. The markets may cheer the calm, but the underlying rivalry remains unresolved.

• China has diversified soybean suppliers, and buying from the U.S. serves both sides — but the broader benefit tilts toward Beijing, which regains broad industrial export access to U.S. markets.

• The vague language on rare earths leaves room for maneuvering. The one-year window is temporary — a tactical pause, not peace.