Trump and Xi dial back tariffs, dodge the Blackwell question

The first Trump/Xi summit in six years produced a yearlong truce and a 10% tariff cut. China will crack down on fentanyl precursors. Rare earth export controls get paused. American soybeans head to Chinese ports again. On Thursday in Busan, Trump called it a "12 out of 10" meeting.

William Bratton at BNP Paribas called the agreements "marginal."

The deal relieves immediate pressure: tariffs drop from roughly 57% to 47% on many Chinese goods.But it also sidesteps every structural question driving U.S./China decoupling. The semiconductor speculation that sent Nvidia to $5 trillion in market value Wednesday evaporated Thursday when Trump clarified he and Xi discussed chips generally, not Blackwell specifically.

Farm state politics got wins. Tech hawks got anxiety. Beijing maintained leverage on rare earths while offering agricultural concessions it can reverse.

What changed Thursday moves needles. What didn't change shapes the next decade.

The Breakdown

• Trump cut fentanyl tariffs from 20% to 10%, dropping overall Chinese import tariffs to 47%. China suspended October rare earth controls but kept April rules.

• Nvidia's Blackwell speculation evaporated when Trump clarified he and Xi discussed chips generally, not advanced processors specifically. No export permits approved.

• Beijing preserved rare earth leverage while offering agricultural wins Trump needs for farm state midterms. Phase One precedent suggests soybean promises may not hold.

• One-year truce removes escalation risk but leaves structural decoupling intact—tech controls, industrial policy conflicts, and military competition all continue.

The actual deal—specifics and sequencing

Trump's 20% fentanyl tariff, imposed earlier this year, drops to 10% immediately. That brings the overall tariff rate on Chinese imports to approximately 47%, down from the 57% level that had importers routing supply chains through Southeast Asia.

China promised "very strong action" on chemicals used to produce fentanyl—the synthetic opioid linked to over 100,000 U.S. overdose deaths. The history here isn't encouraging. Beijing has dangled counternarcotics cooperation before, typically pulling back when relations sour. U.S. officials say meaningful progress requires concrete steps like arrests of precursor chemical producers, not just regulatory promises.

On rare earths, China agreed to suspend for one year the October export controls that would have given Beijing authority to regulate any product manufactured globally with at least 0.1% of its value from Chinese rare earth metals. That December deadline vanished. But the April controls, the original export licensing system remain in place. China still dominates rare earth production and retains the ability to deny export licenses to U.S. companies. The suspension removes an escalation; it doesn't remove the weapon.

Soybean purchases resumed before the meeting. China placed orders with U.S. grain handlers this week, offering relief to farmers who lost billions when Chinese buyers went elsewhere after Trump's tariff surge. China bought more than half of all American soybean exports last year; the sudden stoppage devastated Iowa, Kansas, and other states Trump needs for next year's midterms.

Shipping fees both countries imposed in October also get suspended for one year. The tit-for-tat port charges that roiled international freight costs pause, though the underlying contest over shipbuilding dominance continues.

The Blackwell speculation cycle: Wednesday hype meets Thursday reality

Wednesday, flying to South Korea, Trump signaled he'd discuss Nvidia's Blackwell chips with Xi. He called them "super duper" chips and said the U.S. is "about 10 years ahead of anybody else." Nvidia shares surged. The company became the first to hit $5 trillion in market value.

Thursday, on Air Force One heading home, Trump clarified: "We're not talking about the Blackwell."

They discussed chips generally. Trump said it's "between you and Nvidia," positioning the U.S. as "referee." But no Blackwell deal materialized, no export permits got approved, and Beijing's demand that Washington abandon tech controls went unmet.

The sequence wasn't subtle. Jensen Huang held a conference in Washington Tuesday, mentioning "America" over two dozen times and thanking the audience for "making America great again." He was expected in South Korea for the APEC summit. His lobbying arguing that Nvidia exports prevent Huawei's rise by spreading U.S. tech standards has Trump's ear. It doesn't yet have Trump's commitment on advanced chips.

The H20 chip tells a parallel story. Trump reversed course this summer, approving sales of Nvidia's downgraded H20 processors after initially blocking them in April. Licenses started flowing. But Beijing discouraged Chinese companies from buying H20s, pushing them toward domestic alternatives despite the performance gap. "The president has licensed us to ship to China, but China has blocked us from being able to ship to China," Huang said Tuesday.

Washington wants managed diffusion. Beijing wants conditional access. Nvidia wants predictability. None gets everything.

The three-way calculation—farm politics, tech security, corporate lobbying

Trump needs wins in agricultural states where Chinese retaliation hammered soybean farmers. Midterm elections loom. One former government official briefed on the discussions said Trump had been updated on fraying political support in Iowa, Kansas, and elsewhere, influencing how he's thinking about 2026.

Beijing drove a hard bargain, according to that same official. China wanted Trump to commit to more than soybeans, barley, wheat, corn, nuts. Xi got a truce that preserves his most powerful leverage (rare earth controls from April) while giving Trump the agricultural headlines he needs domestically.

Tech hawks in Washington are alarmed. Senator Chris Coons called potential Blackwell sales "a tragic mistake" and warned against trading "critical cutting-edge AI chips" for "soybean orders." R. Nicholas Burns, U.S. ambassador to China until 2025, said allowing advanced chip sales would be "massive" and noted that Chinese laws require companies to share technology with the government when asked. The People's Liberation Army wants to dislodge the United States, he said, and sees technology as key.

Nvidia's position is that cutting off China's AI researchers, half the world's total, from U.S. tech standards accelerates Huawei's rise and domestic alternatives. The company argues exports help America maintain industrial leadership. Critics counter that China has enough domestic computing power for military applications and that any gains for U.S. companies would be short-lived given Beijing's push for self-sufficiency.

The Trump administration's approach remains transactional. Officials see technology as a bargaining chip for other wins. Trump watches market performance closely; Nvidia drives significant stock market value. That creates tension with the institutional view in parts of the national security establishment that advanced AI shifts the balance of power between superpowers.

Why the pattern holds from 2020

The one-year truce extends pauses the two sides put in place after escalations drove tariffs above 100% on each other's imports. They initially agreed to limit additional tariffs in May, extended that in August, and the current agreement was set to expire November 10.

What's new is modest: tariff reductions, agricultural purchases China can halt again, and a suspension, not elimination, of rare earth controls. What's unchanged is fundamental: structural decoupling continues, technology competition intensifies, and neither side retreats from positions that make a comprehensive trade deal unlikely.

The Phase One agreement from January 2020 also promised soybean purchases. China largely failed to fulfill those commitments. A Phase Two never materialized. Trump sought fundamental changes to Chinese economic policy in his first term—ending state subsidies, stopping forced technology transfers. He didn't get them then. Thursday's meeting didn't address them now.

Julian Evans-Pritchard at Capital Economics noted the reduced tariff "takes the immediate threat of large tariff hikes off the table" but warned "the underlying forces driving the U.S. and China apart remain unresolved, however, and so tensions could easily flare up again."

Taiwan, the most dangerous potential flashpoint between the two countries never came up in the meeting, according to Trump. TikTok got a passing mention in China's official summary ("properly resolve issues") with no actual deal structure. The White House has claimed for over a month it's in final stages of a TikTok deal; Thursday produced only a vague promise to "work with" the U.S.

Trump said he'd visit China in April and Xi would follow with a U.S. visit. The president said he expects a broader trade deal "pretty soon" with "not too many stumbling blocks." That optimism doesn't match the record. Phase One took eighteen months to negotiate and delivered agricultural promises largely unfulfilled. The structural divergences that killed Phase Two, state subsidies, forced tech transfer, market access asymmetries, all remain.

Why this matters:

One-year timelines guarantee serial renegotiation. Every pause expires with midterm or presidential politics in play, ensuring that economic policy stays subordinate to electoral calendars. Beijing can wait. Trump can't.
China suspended October rare earth rules but kept April's export licensing system. Beijing still processes 90% of rare earths globally and can deny licenses for semiconductors, defense systems, and EVs. The December escalation disappeared. The underlying control structure didn't.

❓ Frequently Asked Questions

Q: What happened to the H20 chips Trump approved this summer?

A: Trump reversed his April ban and approved H20 chip sales in summer 2025, but Beijing then discouraged Chinese companies from buying them, pushing domestic alternatives instead. Jensen Huang said "The president has licensed us to ship to China, but China has blocked us." The chips remain legally approved but practically blocked.

Q: Why does China control rare earth exports?

A: China mines about 70% of rare earths globally and processes roughly 90%. The U.S. shut its main rare earth mine in Mountain Pass, California decades ago. American manufacturers now depend on Chinese supply chains for neodymium (permanent magnets), europium (display screens), and dysprosium (motors). That dependency translates to leverage.

Q: What was Phase One and why does it matter now?

A: January 2020's Phase One deal committed China to buying $200 billion in U.S. goods over two years. China bought roughly $120 billion—60% fulfillment—before purchases stalled. Phase Two negotiations, meant to tackle state subsidies and forced technology transfer, never started. Thursday's soybean promises follow an established pattern: agriculture for show, structural issues postponed.

Q: How do the tariff numbers actually work?

A: Trump's base tariffs on China sit around 37%. He added a 20% fentanyl penalty earlier this year, pushing the total to roughly 57%. Thursday's deal cuts that penalty to 10%, bringing the combined rate to 47%. That's still higher than 2019 levels (around 20%) but lower than peak rates that drove importers to Southeast Asia.

Q: Why does the one-year timeline matter?

A: The truce expires November 2026—weeks before U.S. midterms. Trump initially paused escalations in May 2025, extended that pause in August, then again in November. Each renewal came as farm state pressure mounted. Beijing knows American electoral math. One-year deals turn trade policy into perpetual campaign strategy.