SUMMARY
- The main objective for both Trump and Xi this week is to extend the truce on tariffs and supply chains agreed last fall, avoiding re-escalation; the Iran conflict will serve as the implicit backdrop for the meeting but will not be the central topic of discussion.
- Trade discussions will focus on Chinese commitments to purchase US agricultural commodities, US energy exports, and Boeing planes.
- There is limited room for further loosening of US semiconductor controls or China’s rare earths export restrictions.
- We are skeptical that the meeting will produce changes in US policy toward Taiwan.
CONTEXT: A TACTICAL TRUCE IN A STRATEGIC RIVALRY
After postponing his March visit due to the Iran conflict, President Trump will finally visit Beijing on May 14-15. Iran will be the implicit backdrop for the trip but not the central topic of discussion.
Instead, the two leaders will aim to preserve the truce they agreed to at their meeting in South Korea last October. That agreement ended months of disruption and uncertainty from dueling tariffs and supply chain restrictions. Neither leader wishes to see a return to that dynamic in the short term, especially Trump. With US midterm elections approaching and growing domestic unease over Iran, the US president badly wants positive optics for his foreign policy and trade policy.
Xi Jinping has thus far handled Trump’s second term exceptionally well, wielding China’s rare earths dominance to force the US to de-escalate tariffs and export controls last year. For Xi, treating Trump to the pomp of a state visit, and making non-binding commitments to purchase US exports, is a low cost to pay for extending this period of US-China stability. Xi intends to use this window to advance his core objective of boosting China’s self-reliance in foundational technology and critical supply chains.
Another point of context is that the two leaders may meet again as many as three times this year; at minimum, Xi will visit the US at Trump’s invitation, likely towards the end of the year. That planned visit provides both sides with the incentives and communication channels to manage tensions in coming months, but also means that each side may save some deliverables for later this year rather than Trump’s visit this week.
The bottom line is that the visit will mostly be about maintaining dialogue, with outcomes centered on transactional agreements, such as China’s purchases of US agricultural commodities, rather than a “grand bargain” on trade, Taiwan, or Iran. As the 2025 tariff and supply chain war demonstrated, the underlying strategic logic in the relationship pushes each side to reduce its vulnerability to coercion by the other, and to seek new “chokepoints” for when tensions eventually resume – perhaps after US midterm elections this November. Pursuing that strategic leverage, while at the same time maintaining basic stability in the relationship, is no easy feat – and is the main value of this meeting.
TRADE AND TARIFFS
What We Expect:
- Incremental Purchase Commitments: China will extend commitments to buy US agricultural exports (particularly soybeans and sorghum) and may resume purchases of US energy exports (LNG, crude and metallurgical coal), which have been largely stalled since Trump imposed tariffs on Chinese imports in early 2025. A deal to purchase Boeing airplanes has long been in the works and may be announced during this trip or Xi’s visit to the US later this year.
- Board of Trade: The two sides will announce the establishment of a Board of Trade and Board of Investment, which are meant to promote trade in areas not subject to national security concerns. Thus far the idea is more of a concept than fleshed-out mechanism. Promoting investment will be especially thorny.
Watchpoints:
- A deal to avoid summer tariff risks? The Trump administration plans to increase tariffs on China and other leading trading partners this summer, using Section 301 authority to replace tariffs struck down by US courts. Beijing has signaled that it will regard tariff hikes as violations of the Busan truce and may hike its own tariffs in response. It will be interesting to see whether the Trump-Xi meeting signals an understanding between the two sides to head off tensions on this issue this summer. Trump’s increasingly serious inflation predicament may make him more amenable to holding off on tariff hikes on imports of consumer goods from China, especially if Beijing’s purchase commitments (noted above) provide him with positive headlines. US Treasury Secretary Bessent will meet on Wednesday in Seoul with his Chinese counterpart, Vice Premier He Lifeng, suggesting an effort to make further progress on trade outcomes to announce during Trump’s visit.
TECH COMPETITION AND RARE EARTHS
What We Expect
- Status Quo on Rare Earths: China may agree to incremental loosening/speeding of rare earths exports but will limit supplies to US defense-related firms and constrain the ability of US industry to build large stockpiles. A more robust loosening by Beijing would require major concessions from Trump, such as on Taiwan or US tech controls, which are unlikely.
- Status Quo on Export Controls: The US will agree to continue to refrain from major new export controls. If Nvidia CEO Jensen Huang joins Trump’s trip it might lead to a resumption of limited exports of H200 chips, which Trump approved in November but have stalled due to bureaucratic roadblocks by both sides. But the space for further loosening of U.S. controls on advanced semiconductors or semiconductor manufacturing equipment is limited; Trump faces pushback from Congress, while Beijing wants to focus on grooming domestic alternatives to US suppliers. Indeed, the tech/rare earths truce is under constant pressure from the intensity of US-China tech competition and mutual de-risking efforts, and vulnerable to breaking down in coming months without continued attention from the two leaders.
Watchpoints:
- Discussion of AI Safeguards: We expect the two sides to signal increased dialogue on guardrails for advanced AI (such as preventing biological attacks), but substantive cooperation will be very difficult to achieve given mutual distrust and the hot AI rivalry.
IRAN
What We Expect:
- Mutual statements in support of reopening the Strait of Hormuz and a peace deal, but no game-changing moves from China. Beijing would like the disruption of the conflict to end but is not inclined to play a pivotal role (such as through providing security guarantees). Beijing will nudge Iran to continue negotiations, while insisting that the burden is on the US to find mutually agreeable terms with Tehran.
Watchpoints:
- Nuances: Limited expectations notwithstanding, the Iran issue is highly complex and a source of both potential cooperation and tension between the two sides – particularly as the US has sanctioned a growing number of Chinese firms over transactions with Iran. We will be closely watching for nuances in signaling and hints as to the nature of private discussions between the two leaders.
TAIWAN
What We Expect:
- Status quo, especially in public. There has been quite a bit of speculation heading into this meeting that Xi will seek concessions from Trump, such as a statement that the US opposes any moves by Taiwan for independence (a step up from Washington’s conventional line of “not supporting” independence). We are skeptical about a significant change in US policy. Trump’s advisors will caution him that weakening US rhetorical support for Taiwan could create panic in Taipei. Beijing is also unlikely to dangle major rewards for such a change in wording, aware that Trump has limited time in office and that Taiwan commands strong support in US Congress.
Watchpoints:
- Private discussions, including on upcoming arms sales. For Beijing, Taiwan is the most sensitive issue in the US-China relationship. The US is preparing another arms sale to Taiwan this summer, which Beijing will feel compelled to respond to (military exercises, sanctions against US firms, etc.). We will look for signals trickling out from the meeting as to how the two leaders engaged on this topic.
