During their latest meeting in South Korea, US President Donald Trump and Chinese President Xi Jinping managed to cool the intense trade stand-off between their countries briefly.
The two leaders reached a provisional deal: the US would trim tariffs on Chinese goods by 10%, bringing the rate down to 47%, while China would pause its export curbs on rare earth minerals and increase purchases of American soybeans.
Trump hailed the talks as “a great success,” adding that he will visit China in April next year, with Xi expected to travel to the US soon after.
However, even after the temporary truce, the bigger question still looms.
Will this ease the pressure on their economies?Though China no longer faces a threat of Trump's 100% tariffs and US gets to sell its soybeans, there is a bigger picture.
Too late for the soybean agreement
Among the hardest hit by the tariff tussle are American soybean farmers. The commodity, the country’s largest agricultural export, has been effectively shut out of China since May, when higher tariffs triggered an embargo.
Until this week, China had not placed a single new order.
The timing of this breakthrough may be too late for many growers. Peak harvest season is already under way, and months of muted demand already forced farmers to sell their crops at lower prices, CNN reported.
Though Trump has promised that China will purchase “tremendous amounts” of soybeans, but the financial damage has already been done for producers who needed revenue weeks ago.
US labour market continues to weaken
The US job market, which had begun losing momentum before Trump returned to office, has slowed even further. Hiring has tapered off as companies hold back expansion plans due to tariff uncertainty, and layoffs are becoming more common. For the first time in several years, there are now more unemployed workers than job openings, according to the Bureau of Labor Statistics.
Technology shifts are adding pressure. Artificial intelligence is contributing to job cuts across multiple sectors, including a wave of redundancies at Amazon this week. Policymakers warn that monetary tools are unlikely to solve the problem, CNN reported.
Federal Reserve governor Christopher Waller stressed that “if AI constitutes a structural shift in the demand for labor, monetary policy will not be an effective tool.”
Rate cuts could also push inflation higher, at a moment when the cost of goods and services is already rising, affected both by tariffs and tighter immigration rules that have reduced labour supply in farming and childcare.
China has deeper woes
Despite resilient export performance during Trump’s global tariff offensive, China’s longstanding domestic problems show no sign of improvement. The country continues to grapple with a protracted property downturn, deflation pressures, weak consumer sentiment and high youth unemployment.
Louise Loo, head of Asia economics at Oxford Economics, told CNN that the revised trade terms offer limited upside, saying that “beyond a cyclical impulse, it’s hard to see today’s revised trade terms as materially shifting China’s more structural challenges at home, where we think tariffs are, if anything, fading in macro relevance.”
The fentanyl-related tariff reduction included in the deal may add only a “marginal” 0.2% to China’s growth forecast next year, she added.
Economic indicators reinforce the gloom. China’s factory-gate prices dropped for the 36th consecutive month in September. Retail sales rose just 3% year-on-year, the slowest pace in 10 months, and new home prices posted their sharpest fall in nearly a year. Even China’s electric vehicle industry is stuck in a downward price spiral caused by excess capacity.
No signed deal yet
For now, the understanding between the leaders is only a draft. Final details require further negotiations, and there is no guarantee that the agreement will be formalised.
What has been taken off the table, at least temporarily, is Trump’s threat to impose a 100% tariff on Chinese exports, a move that would almost certainly have prompted retaliation from Beijing.