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While the summit at the White House of US President Trump and Chinese President Xi Jinping ended on Wednesday and Thursday with far more than the skeptical US media had expected, China had desired much more. It was not satisfied with the existing trade truce that had been negotiated by both sides and instead had wanted it to be extended throughout the remainder of Trump's term in office. Instead, it will now be valid for sixty days.
"We're giving them more time to see what we can do on the economic front," said Treasury Secretary Scott Bessent in announcing the two-month extension of the current trade agreement with China to January 10, the end of the 60-day period. In short, China has not fulfilled its promises.
The U.S. is meeting commitments for 25 million tons of soybeans as China buys $2 billion in agriculture products outside of soybeans while it is only on pace to meet $800 million in additional agricultural purchases through the end of the year, Bessent said. The U.S. is also short of Chinese commitments to ship 70% of rare earth minerals through to the U.S., a critical mineral that China used as a key negotiating chip prior to the talks.
In an interview on Bloomberg TV, Wendy Cutler, the former acting deputy U.S. Trade Representative, described the talks in terms of what China wanted: a way to "lock in" the trade truce until the end of Trump's term. Instead, China got a fraction of that. "It's a way, way shorter time than China had hoped for," Cutler said.
Instead, Wall Street had hoped for a 6-month extension. After the initial shock that was certain to occur when the announcement was made, Chinese stocks plunged 1.7% on the first day of trading after the meeting, before rebounding somewhat from the lows. The mainland CSI 300 Index is trading down about 1% today.
At the summit, Trump was friendly but was not eager to reveal many details about the summit negotiations. As President Xi arrived at Joint Base Andrews in a B-1 Lancer bomber flyover, the first time a foreign leader was to meet with the US President at that airbase since 1962, Trump said he had a "great meeting" with the leader. Trump said he and President Xi talked about "a lot of things" and that "He loves good granite. Great meeting." The press tried to get more information out of the President on the talks but he declined to provide much detail.
On the matter of Taiwan, the Chinese leader urged Trump to oppose Taiwan's independence, language that is even more hard line than Washington's normal refrain that it does not "support" independence for the island. And no sign that Trump is even considering such a move.
But a lot more needs to be done on AI by China. The fact is Chinese open-weight AI models are already nearing parity with high-end models that were developed in the US at great expense. In fact, there are already several low-cost Chinese AI models that are starting to erode US competitive advantage in AI. Were the Chinese companies that distilled US frontier AI models to develop their own versions of those models illegally doing so? We don't know.
The broad takeaway from the summit is that the Trump administration is handling the complicated relationship with China just fine -- it is friendly enough to keep dialogue open but tough enough to keep Beijing on its toes. Beijing needed a long runway to market its requested trade concession extension, but instead it got a short one. The next deadline for China is January 10 and, for now, the U.S. has the upper hand.
