DC Edit | World Economy Breathes Easy After Trump Meets Xi

US President Donald Trump, who has damaged world trade by struggling with the world’s second largest economy, said that he made agreements with Chinese leader Xi Jinping in a 100-minute meeting in Busan, South Korea. As the world adjusts to dealing with huge gaps between what he says and what he does, a ‘pause’ may have been pressed on the worry and worry button. However, believing that all problems are solved in a short time means believing that an unpredictable Trump may this time tend to match words with action.

A 10 percent drop in U.S. tariffs (from 57 percent to 47 percent) in exchange for China lifting restrictions on rare earths exports (for one year) could be considered the beginning of that cause, marking the beginning of the end of a trade war that has fragmented global trade, disrupting supply chains and sending entire nations rushing to make deals with the United States or diversify their export destinations.

The last six months have been chaotic since high tariffs and punitive secondary tariffs came into play due to the capricious whims and fancies of a transaction-oriented US President; India was one of the worst affected, along with China and Brazil. Accusing Russia of filling its coffers with oil money supporting the Ukraine war and using India as leverage for a President seeking the Peace Nobel was discriminatory.

Based on Trump’s comments aboard Air Force One while returning to the United States, and official Chinese media quoting Xi Jinping’s responses to the bilateral meeting six years later, the question now is whether there has been a real change of heart that has led Trump to suggest trade deals with India and Brazil are imminent; Although important points on bridging the differences with China have been discussed, the “fentanyl” penalty against China is being eased.

Again, it’s debatable whether Trump realizes that any tariffs are an import tax that Americans will have to pay out of pocket. In fact, as he has punished Canada for echoing Ronald Reagan’s case against tariffs, it’s hard to predict that things will go smoothly from 2026 onwards, when most of Trump’s tariff outrage is over and some order has been restored to global trade.

While India justifies reducing its purchases of Russian oil on the grounds that US sanctions must be adhered to, fingers crossed may well be an appropriate course of action as India waits for news that Trump will sign a trade deal, which he should logically follow. While China may force the US to buy soybeans to please Trump and US farmers, India may find itself in a dilemma on this point of disagreement.

Only the fact that Trump appears to be backing away from extreme positions even as he touts his successes in bringing Americans lower prices at the gas pump and on supermarket grocery shelves may be the silver lining discernible after months of universal turmoil. It’s a good thing, then, that the world’s largest economies are realizing that, despite all the extravagant and punitive action, they can’t afford to blow up the world economy in a fight over the United States’ widening trade deficit with China.