Trade war between the United States and China has a truce, but the use of reciprocal “choke points” will remain possible.
Trump and Xi agreed to a one-year trade truce at their meeting in South Korea on Thursday (October 30, 2025). This was the first summit between the leaders in Trump’s second term and kicked off a series of meetings between the two, which, according to Trump, will include a visit to China next year.
In addition to suspending the threat of 100% tariffs announced earlier this month, the United States will reduce tariffs on Chinese exports from 57% to 47%, while China agreed to suspend for one year its most recent export controls and restrictions on critical minerals and rare earths.
As part of the agreement, the United States will postpone tariffs on Chinese ships arriving at American ports, and China agreed to buy American soybeans, as well as intensify efforts to stop the flow of chemical precursors to fentanyl, Trump said. Trump also hinted that China could soon reach an agreement to buy oil and gas from Alaska. The United States will suspend plans to control exports to subsidiaries of Chinese companies, the Chinese Ministry of Commerce announced.
The truce reached at the meeting was more comprehensive than others the countries have achieved in recent months. The meeting was closely watched internationally, in part because China’s export controls have harmed manufacturing sectors in third countries.
In recent years, China has identified several “choke points” that it can exert with impacts on the US economy. Rare earths, critical minerals, and magnets are some of those the country has used so far. Mitigating this choke point will require years of investment, as well as significant cooperation between the US and many other countries on several continents.
The challenge will go far beyond access to mineral raw materials, mainly reaching their refining, where Chinese dominance currently reaches 80-90% of the world’s installed capacity in some cases. To complicate matters, there are time lags before investments begin to operate fully.
One conclusion of the truce is that China’s demonstration of control over rare earth exports proved to be a powerful tool of pressure—and one that could be used again at any time. This does not mean that Beijing has achieved an absolute victory: even after the truce, the average US tariff on Chinese imports, at around 45%, is well above the 20% prior to Trump’s return to the White House. But Beijing avoided something worse and may be able to live with the current level, given its efforts to reduce its dependence on the United States and its ability to transship products through Southeast Asian countries, despite the increase in US tariffs.
This week also exposed the extent to which Trump has destabilized the multilateral trade order, generating uncertainty around the world. The system of bilateral negotiations he initiated leaves the competitiveness of other countries dependent on the unstable relations between the world’s two largest economies. China’s exercise of the “choke point” via rare earths and magnets has affected the entire world – as seen in the despair of industrial producers in Europe and elsewhere, facing the prospect of the disappearance of certain refined products from China.
Less clear is whether the US government is ready to ease restrictions on the export of advanced semiconductors – the technological “choke point” on the US side. Trump said it is now up to Nvidia to talk directly to China about the matter, with the American government acting as an “arbiter”.
It is interesting to note that the first use of the US technological “chokepoint” occurred in 2019, during the first Trump administration, when restrictions were placed on Chinese telecommunications firms – including Huawei – accessing US technologies. At the time, we wrote here that this would force China to climb the rest of the technological ladder on its own.
Indeed, while not eliminating the US lead, we have witnessed a reinvention of Huawei and even, to the surprise of many, the emergence of DeepSeek as a Chinese AI. The US lead in semiconductors and AI has been matched by China’s lead in clean energy technology, batteries, and related fields. Repeating what I said in 2019: “The technological chapter of the US-China confrontation will endure.”
Two points should be noted. First, recent experience has shown that any kind of agreement reached between the two superpowers, with their mutual distrust, may not last long. Several truces have collapsed this year. And the last major agreement signed between the two leaders was the “phase one” trade deal in 2020. In recent days, the Office of the United States Trade Representative announced an investigation into China’s “apparent non-compliance” with the agreement. All of this bodes ill for a pact that covers the most complex issues facing the United States and China.
Secondly, there has long been a demand – from the US and others, including multilateral institutions – that China implement reforms that rebalance its economy and increase the role of domestic consumption, no longer requiring such large trade surpluses as has been the case until now. US Treasury Secretary Scott Bessent has referred to this during recent trade negotiations. Beijing appeared to ignore these calls last week, releasing a policy document that emphasizes self-sufficiency in manufacturing and technology as the driving forces of the Chinese economy until at least 2030.
For now, the cessation of hostilities has given both sides time to try to implement a more lasting and comprehensive trade agreement. The two additional meetings proposed between Trump and Xi are a positive sign. However, even abstracting from the sharp increase that US tariffs on China ultimately suffered this year, the underlying rivalry will continue to lead both countries to try to overcome their mutual “choke points”.
Otaviano Canuto, based in Washington, D.C, is a former vice president and a former executive director at the World Bank, a former executive director at the International Monetary Fund, and a former vice president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at the University of São Paulo and the University of Campinas, Brazil. Currently, he is a senior fellow at the Policy Center for the New South, a professorial lecturer of international affairs at the Elliott School of International Affairs – George Washington University, a nonresident senior fellow at Brookings Institution, a professor affiliate at UM6P, and principal at Center for Macroeconomics and Development.
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