Bloomberg Audio Studios, podcasts, radio news.
High stakes negotiations in Busan, South Korea between Presidents Trump and She. This was a chance for both sides to stabilize relations after some rocking months thanks to Trump's agree.
On Thursday, Presidents Donald Trump and Shihin Ping of China reached an agreement a one year truce in their trade war.
I thought it was an amazing meeting. He's a great leader, great leader of a very powerful, very strong country, China.
She, through an interpreter, said he and Trump didn't always see eye to eye, but they had found a way forward.
You and I at the helm of China US relations should stay the right course and ensured a steady sailing forward of the giant ship of China US relations.
The agreement capped six contentious months, starting when Trump announced his global tariffs and threatened retaliatory arabs as high as one hundred and forty five percent. The highly anticipated meeting between Trump and She in South Korea started with a long and awkward handshake.
We're kind good to see you again. There seemed to be some chemistry between the two men. They were shaking hands at the doorway. Trump even went in and whispered something to Shiji Ping, who knows what he said.
John lou is Bloomberg's executive editor for Greater China. He's based in Beijing. He says the agreement, which brought China's tariffs back to where they were roughly when Trump rolled them out earlier this year, buys China some breathing room.
While I think China is happy that there can be a trade truths for maybe the next twelve months, I think the concern that ultimately the United States is trying to put the strategy in place that would restrain China's rise is going to continue to be at the forefront of Shiji Ping and these leadership's minds.
Brendan Murray is Bloomberg's Global Trade editor, and he says, now that the meeting is over, it will be fascinating to see how news of the agreement is received in Beijing and DC.
I do think that there will be some people in Washington who will look at this as China getting the better of Trump, given the breakdown of the concessions that each side gave up. So now we'll hear the debate about the actual substance. If what we're seeing is a truce for the next twelve months.
I'm David Gura, and this is the big take from Bloomberg News Today. On the show, parsing the details of the new US China trade agreement and why both countries are moving forward without a permanent deal. Thursday's agreement marks a temporary truce in a US China trade war that President Trump set off in April. I asked Bloomberg's Brendan Murray and John lou to dig into what each country won and law in the agreement.
Here's Brendan, So here's the scorecard that I've been keeping. The US concessions. The US is lowering fentanyl tariffs from twenty percent to ten percent. The US is suspending this fifty percent expansion of its US entity list, the ownership list that so irritated the Chinese a few weeks ago. The US is backing away from the one hundred percent tariff threat that President Trump put out there a few weeks ago. China's reciprocal tariff rate stays at ten percent for another year,
and they're suspending ship fees. Both countries are, but that was much more damaging to China than it was to the US. So those are the US concessions. What China gave up its rare earth controls, the most extreme of which it announced a few weeks ago. It's suspending those for a year. It says it's going to resume buying American soybeans and potentially there's some energy deals to be done there. It's going to crack down on the export
of the chemicals used to make fentanyl. And Trump said that China agreed to some vague promises of investments and then agreed to work on a solution for TikTok So. I think any way you add those up, China comes up a little bit, you know, giving up less than what the US gave up. And I believe that the Hawks in Washington would support that view.
John, as you here, Brendan described that scorecard. As he put it, there are some things that these two leaders didn't talk about. They didn't get into great detail about these Nvidia Blackwell chips. Sounds like they didn't talk about Taiwan. If you believe the President of the United States, how surprising is that what wasn't talked about in Busan.
On the question of Taiwan. From what I've heard from President Trump, he seems to be very aware of how sensitive a topic that is and how potentially explosive on chips, you know, I think China wants the Nvidia Blackwell chips. If they could get their hands on the most advanced
technology that's out there, they definitely would do that. Again, I think it's some consideration of how likely it would have been for them to get that, and if putting too much, it's putting too much emphasis on that would have meant giving up on something else. Ultimately, Beijing is going to walk away feeling like it got a pretty good deal, and going forward it's going to try to hold the United States to what has been agreed to.
On that point, I mean, this is not a deal that's going to continue in perpetuity. And Brendan, I think I've seen this described as subscription diplomacy. You can kind of analogize this to your Netflix subscription. You had this three month pause on tariffs, and now you have a year long pause on tariffs. It just keeps getting extended and there's no kind of permanent resolution to all of this. What does that mean for US China relations long term?
So, the Phase one trade deal that President Trump signed in his first term. What they had achieved was a ninety page, multi chapter agreement that President Trump said would transform the relationship between the US and China. So fast forward to what we've seen come out of the latest
Shi Trump deal. We have a couple hundred word social media posts from President Trump and basically a relationship that is no longer based on something that's in writing, that will be based on a series of talks going forward.
And John, I'd be curious to hear your reaction to this, but that really plays into China's strategy of let's just kind of string them along and things can escalate and de escalate, but we'll have this series of discussions rather than something in writing that will abide by and the two sides will kind of try to maintain some sort of stability going forward. And given the volatility of the temperament of President Trump, I'm not really sure that plays into his strengths.
I think the fundamental relationship is one of rivalry and I don't think any deal that is struck today or in a year is going to change that. And what it means is, yes, there's a truce, but at the same time both countries are using that time to try and build up an arsenal that they can bring to bear in the future. So I think we are inherently
going to have lots of volatility. We're going to have deals that come together only to fall apart, because fundamentally the two countries are at odds, are competing, and it's not a relationship that lends itself to stability.
After the break, with many negotiations still in progress, what does this US China deal mean for other countries still stuck in the trade war With several issues unsettled between the United States and China. I spoke with Bloomberg's Brendan Murray and John lou about what's next. So it seems like after this meeting, lower level officials advisors are going
to hammer out some of the details here. But there was such a build up to these two leaders meeting face to face, and I wonder if this is what we're going to see going forward here the big decisions are going to be made when these two men get together. That's just going to be kind of the contour of these conversations, the way that these countries deal with each other going forward.
Leaderal leader, I think that's the way it will be. We had this announcement by President Trump saying that he was going to visit China in April, and the President she would then do a reciprocal visit to the US after that. We also know that China is hosting APEC next year and the United States is hosting the G twenty in Miami at the end of the year, and so there's going to be a lot of opportunity for
these two men to get together. And I think that just means that a lot of the problems that pop up between these two countries will ultimately have to be decided and resolved or sort of tempered by these two men.
In looking at the state of trade negotiations with the US globally, Brendan has described them as fitting into different buckets. There's the first bucket, appeasement.
You've got basically countries that are just having to accept the tariffs.
Then there's the second bucket, the kicking and screaming bucket.
Per se Canada is the perfect example. They've been back and forth with the threats between the US and Canada for months now.
Then the third bugget the country's putting up a fight.
And China, I think really has shown compared to at least Trump's first term dealings with shijiping, that it can play hardball the way Trump likes to play hardball. The ability to use the threat of rare earths and China's dominance with them really changed the game this year. The US has a technology advantage and they will use that as leverage over China. But China has this rare earth's advantage that really hasn't come to the fore the way it has until now. So I think that that's really
where the game has changed. China has said you want to play rough, we can play rough too, and everyone else realized that, yeah, they can do some damage if they want, or threaten it at least to get what they want.
China's advantage on rare earth's is not going away soon. Even with the US building up its capabilities and partnerships, It'll be many years before it could conceivably replace China as a supplier. Brendan give us a bit of context here is you look at the long sweep of this trade war. Is global trade now in a better place than it was yesterday or a week ago, last year or so. How has this meeting kind of changed the way that this war is unfolding.
Yeah, I mean, global trade has been pretty resilient through all of this. I mean you could go back to the first US China tariff conflicts in Trump's first term through COVID and then the return of Trump with the reciprocal tariffs kind of shocking every country, and trade has held up pretty well. The World Trade Organization will tell you that seventy five percent or so of trade globally
still runs by rules by low tariffs. But that number is going down the more the US puts tariffs up, and we'll have to see how long that that can hold out. And remember President Trump went around he calls them deals, but he's putting higher tariffs these countries in Asia and they won't be liking it. So how long will these countries be able to withstand the headwinds of these higher tariffs. Once their industries start to suffer, they
then here comes the political pressure. So I think the big question is, you know, we've seen over the past half century or so free trade being used to ensure peace, the peace dividend. If we've traded with one another, we won't go to war with one another. Now President Trump is using the threat of tariffs to tell countries to not be in disputes, and so tariffs are being really turned into something completely different than they have been for the past fifty years. And I think we don't really
know how it's going to end up. But the economic consequences are going to be slow, and perhaps they'll deliver jobs in the US and investments, and you know, maybe that's what will end up. But I think there's going to be a lot of disruption and uncertainty in the meantime.
And I guess I should note here too, Brandon, that even though this deal did knock the US tariffs down by ten percent, the overall China tariff is much higher than it was a year ago, about thirty percent on average, according to Bloomberg Industries, with many products facing tariffs as high as forty seven percent.
Yeah, China is still something in the thirty percent range, thirty to forty percent, and it will be more competitive than it otherwise would have been with its manufacturing rivals across Southeast Asia, which came in somewhere around the twenty percent mark. But China has found markets for goods that are no longer being bought by Americans and has maintained that the question is is China going to export problems to other countries that will have a backlash the way the US has reacted.
And that getsuon my last question to you, John, we see a country that is looking many years down the road. I think on the eve of this meeting, China announced its next five year plan will significantly boost the shriff of Chinese consumerism, domestic consumption. Seems intentional to me. What is the strategy there on the Chinese part.
I think China sees it's dependence on trade as a weakness. I think China has come away from the last you know, eight to ten years believing that any dependency that can be weaponized will be weaponized. And so, you know, Chinese trade has been booming, as Brenda was saying, you know, China's selling stuff to Europe, to Latin America, to Africa, around the world, and it's trade surplus, I think is on pace for like one point five trillion US dollars
this year. I think there's a general recognition in China that that is not a sustainable path forward, that that is just going to peeve off all of their trading partners, and so they are putting a lot of effort in trying to develop a domestic consumer economy. The problem is how do you do that? If they can do that, and I think there are a lot of reasons to think it's going to be a real challenge.
The other issue there is that Trump's political clock is ticking a lot faster than China's on this, and China has the advantage of time and they can drag this along. President Trump needs to deliver something economically before the midterm elections start heating up in nine months or so. So I think the time is not on President Trump's side here, and China plays a much longer game than the US does.
This is the Big Take from Bloomberg News. I'm David Gura. To get more from The Big Take and unlimited access to all of Bloomberg dot com, subscribe today at Bloomberg dot com slash podcast offer. If you like this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.