Trump and Xi Formalize Trade Truce as US Tariffs on China Fall to 31%

President Trump’s two-day summit with Xi Jinping in Beijing produced a formalized extension of the November 2025 tariff truce, with Chinese commitments to purchase 200 Boeing aircraft and maintain agricultural imports—but left unaddressed the structural disputes over intellectual property, subsidies, and market access that have defined the relationship for years.

The agreement builds on the deal from November 2025 that reduced the overall US tariff rate on Chinese imports from 41% to 31%, according to the White House. The framework cut fentanyl-related Tariffs from 20% to 10% and suspended China’s retaliatory tariffs on US agricultural products—soybeans, pork, corn, dairy, and wheat. Beijing committed to purchase 12 million metric tons of US soybeans in late 2025 and 25 million metric tons annually through 2028.

Markets rallied on optimism around the summit. The S&P 500 hit a record high on May 14, while the Nasdaq added 1.2% to 26,402.34, according to CNBC. Trump announced during the summit that China agreed to order 200 Boeing jets—a figure below the 500 aircraft that Jefferies had estimated as possible, per TheStreet.

Stabilization Over Structural Reform

The summit’s primary achievement is formalizing what had been a series of tactical truces into a more durable framework. “The big word will be stabilization,” Harvard professor Graham Allison told CNBC. “The truce that the two parties negotiated … will, I suspect, become a formal agreement.”

But stabilization is not the same as resolution. US Trade Representative Jamieson Greer stated to WION: “It’s not really a situation where we go and get China to change the way they govern, the way they manage their economy.” The approach marks a departure from prior efforts to force Beijing into systemic economic reforms.

Prediction markets ahead of the summit showed 86% probability of a Boeing aircraft announcement, 79% for soybean purchases, and 69% for establishment of a “US-China Board of Trade”—a proposed $30 billion mechanism to manage sectoral trade flows, according to CNBC. While the Boeing order materialized, details on the Board of Trade remain vague.

Semiconductors and Technology Controls

The November 2025 agreement included significant technology provisions. China terminated antitrust, anti-monopoly, and anti-dumping investigations targeting US semiconductor companies, according to the White House. Beijing also suspended implementation of rare earth export controls introduced in October 2025, issuing general licenses for exports of rare earths, gallium, germanium, antimony, and graphite.

Legal analysis from Morrison Foerster noted that China allowed the reopening of Nexperia semiconductor facilities and suspended the “Affiliates Rule,” which had imposed extraterritorial reach on Chinese export controls. These concessions address immediate friction points but leave the fundamental competition over AI chips and advanced Semiconductors unresolved.

Supply Chain Fragmentation Continues

Despite the tariff truce, US-China two-way goods trade shrank 29% to $415 billion in 2025, down from $582 billion in 2024, according to WION. The US trade deficit with China fell 32% to $202 billion—the lowest in two decades.

This contraction reflects ongoing supply chain diversification rather than reshoring to the United States. Research from Stanford FSI found that nearshoring to Vietnam and Mexico has accelerated, while Chinese foreign direct investment has expanded into Southeast Asia to maintain indirect access to US markets. Genuine reshoring of manufacturing to American soil remains limited.

Geopolitical Leverage and Enforcement Gaps

The timing of the summit reflects competing pressures. Trump’s Iran crisis demands Chinese cooperation—or at minimum non-interference—in Middle East diplomacy. Economic analysis from Coface characterized the November deal as “a tactical truce, not a strategic shift,” noting that enforcement mechanisms remain fragile and subject to political shifts.

The February 2026 Supreme Court ruling limiting Trump’s tariff authority under IEEPA forced the administration to rely on Section 301 and other mechanisms, constraining his ability to rapidly reimpose levies. This legal context makes the formalized agreement more valuable as a predictable framework, even as it leaves fundamental disputes unaddressed.

Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng met for three hours in Incheon, South Korea, on May 13 to prepare summit terms, according to WION. The focus on managed outcomes over systemic change signals both sides’ preference for transactional dealmaking.

What to Watch

Implementation details for the proposed US-China Board of Trade will reveal whether the mechanism functions as a genuine dispute resolution body or merely formalizes managed trade quotas. Boeing delivery timelines and payment terms for the 200 aircraft will test China’s commitment beyond headline announcements. Semiconductor export licenses bear monitoring—any reimposition of rare earth controls would signal Beijing’s willingness to use leverage. Finally, watch Vietnam and Mexico trade data: if their export volumes to the US continue climbing while direct China trade remains flat, it confirms supply chain fragmentation is structural, not cyclical. The US trade deficit trajectory through Q3 2026 will show whether tariff reductions reignite import growth or whether the relationship has fundamentally reset at lower volumes.