Latest U.S.–China Trade Truce Leaves Fundamental Issues Unresolved

A new trade truce between the United States and China is offering a welcome easing of immediate tensions — but beneath the surface, the most serious structural conflicts remain untouched.

In Kuala Lumpur this past weekend, senior officials from Washington and Beijing announced a series of agreements aimed at reducing friction ahead of a summit between Donald Trump and Xi Jinping. Among the highlights: China signaled it will resume large-scale soy purchases in key U.S. states ahead of the U.S. election, and the U.S. backed away from a threatened 100 % tariff increase in exchange for Beijing’s commitment on critical rare-earth magnets used in manufacturing.

Investors greeted the development with relief. The financial markets, wary of widening trade wars and supply-chain shocks, took it as a signal that the world’s two largest economies are at least willing to talk.

Yet analysts caution: this is far from a sweeping resolution.

A key sticking point remains the export of military-grade rare earths from China and advanced technology export controls from the U.S. While China has offered to speed up approvals for non-military rare-earth magnet exports and create a “green channel” for trusted U.S. firms, Beijing stopped short of promising access to specialized magnets crucial for U.S. defense systems. Meanwhile, the U.S. continues to enforce export restrictions on advanced AI chips and other strategic technologies.

Another unresolved dimension: Beijing has yet to commit in clear dollar terms to increase purchases of U.S. goods and services, a point Washington considers fundamental to narrowing its trade deficit. The joint statement simply affirms both sides “attach paramount importance” to intellectual-property protections, but it lacks detail on how China will reform its industrial subsidies or curb forced technology transfers.

In short: both nations have agreed to ease their public posture, but the underlying issues — export controls, rare-earths leverage, state-backed industrial policy and technology dominance — are largely unsolved.

What lies ahead? Observers say the 90-day window under the current truce must yield concrete follow-through or risk a reversion to escalation. The next phase will hinge on whether Trump and Xi can translate headline diplomacy into enforceable commitments.

For businesses and investors, the message is cautious optimism. Supply-chain pressure may ease in the short term, but higher tariffs, strategic decoupling and policy uncertainty remain very much in play.
bankofsingapore.com