MNI: More China-US Tensions Likely Despite Progress-Advisors

This week’s expected meeting between Donald Trump and Xi Jinping is likely to provide a short-term fix to their nations’ disputes, with the removal of a 20% U.S. tariff linked to fentanyl and a one-year delay on part of China’s rare earth exports restrictions, but persisting deep disagreements augur further tensions ahead, Chinese policy advisors told MNI.

Differences over the issue of Taiwan — which Beijing maintains is part of its sovereign territory — and over what China views as U.S. policies restricting its economic development mean that this ‘brief cooling-off period’ could end at any time, said Dong Shaopeng, president at the Beijing Silk-Road Cooperation Association.

However, in the meantime likely moves by the U.S. to postpone plans to impose new 100% tariffs as China pushes back implementation of rare-earth export-control measures announced in October represent a significant de-escalation between the world’s two largest economies, a former official told MNI, adding that if implemented satisfactorily the agreement could open the way to a visit to China by Trump in the first half of next year.(See MNI: Trump-Xi Meet Likely, But Any Deal Modest-China Advisors)

Thursday’s likely deal may also involve the U.S. rolling back some of the tariffs imposed during Trump’s first term in office in exchange for a Chinese commitment to boost imports of items like U.S. soybeans, the former official said, though he added that suspension of the 24% “Liberation Day” levy is only likely to be extended for another three months rather than made permanent on Nov 10.

LONG-RUN TENSIONS

The U.S. is also likely to remove “all or most” of the 20% fentanyl tariff, following the meeting between delegations headed by U.S. Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng in Malaysia over the weekend, according to Wu Xinbo, director of Fudan University’s Center for American Studies and an adviser to China’s Foreign Ministry.

“The recent U.S. move to expand export controls to entities with 50% of sanctioned parent ownership is expected to be removed or at least suspended in exchange for China taking action on its expanded rare-earth exports,” Wu said.

However, the former official said that in the long run China-U.S. relations could enter a pattern of on-and-off confrontations unless fundamental conflicts are resolved. (See MNI: Relaxed Policy To Drive PBOC Over Next Five Years - Advrs)

A critical impediment to substantive progress is the lack of effective communication between the two sides, said Zhao Hai, director of the International Politics Research Department at the National Global Strategy Think Tank of the Chinese Academy of Social Sciences. There is no one around Trump who can engage in deep and effective communication with China's senior leadership, Zhao said, though he added that ways might be found to improve this situation when the two presidents meet.

The two countries are still likely to leave themselves room to manoeuvre, though they may relax their respective export controls via mechanisms such as whitelists or green channels, according to Zhao, who noted that China’s use of restrictions on rare earths could be a model for future moves by Beijing.