Trump And Xi Strike Fragile Trade Truce In Asia

In a whirlwind week of diplomacy, U.S. President Donald Trump’s five-day tour of Asia in late October 2025 has redrawn the contours of global power politics, highlighting both the intensifying rivalry between the United States and China and the delicate balancing acts of regional players like Japan and the Association of Southeast Asian Nations (ASEAN). The trip, which saw Trump meeting with Japanese Prime Minister Sanae Takaichi, Chinese President Xi Jinping, and key Southeast Asian leaders, culminated in a high-stakes summit in Busan, South Korea, alongside the Asia-Pacific Economic Cooperation (APEC) gathering.

According to Fair Observer, Trump’s itinerary included stops in Japan, South Korea, and Malaysia, with each leg underscoring the shifting alliances and anxieties that now define the Indo-Pacific region. The newly inaugurated Japanese Prime Minister Takaichi, fresh from back-to-back visits to Malaysia for ASEAN and to South Korea for APEC, hosted Trump in Tokyo. Japanese media, as reported by Fair Observer, lauded Takaichi’s energy, visibility, and political poise, even if the major agreements on rare earths, tariffs, and defense were largely the product of bureaucratic groundwork laid under her predecessor, Shigeru Ishiba.

Yet, as Saya Kiba, a professor at Kobe City University of Foreign Studies, told Fair Observer, the diplomatic choreography was significant. Takaichi’s sequence of visits projected momentum and international readiness, signaling to the United States that Japan is a reliable ally capable of meeting security expectations. At the same time, her approach sought to reassure Asian neighbors that Japan’s growing military posture was not destabilizing, but rather a commitment to a "free, open and rule-based international order."

Behind the scenes, however, the summit’s outcomes raised questions. As Kiba pointed out, “What is the source of the budget for the defense budget?” Takaichi’s pledges to boost defense spending, maintain high-quality social welfare, and explore tax reform have yet to be matched by concrete financing plans—a challenge that even her predecessor, Fumio Kishida, struggled to address. The optics of Takaichi’s rapport with Trump, followed by her pragmatic meeting with Xi Jinping in South Korea, did not go unnoticed in Beijing. According to Fair Observer, she "toned down her very hard stance toward China," and both leaders agreed to strengthen defense communication and crisis-management mechanisms.

Meanwhile, the centerpiece of Trump’s Asia tour was his much-anticipated meeting with Xi Jinping in Busan. As detailed by AnewZ, the summit marked the culmination of months of escalating trade tensions between the world’s two largest economies. Since January 2025, the Trump administration had wielded the International Emergency Economic Powers Act (IEEPA) to impose and threaten fentanyl-related and reciprocal tariffs on Chinese imports. In response, China expanded export controls on rare earth minerals—vital for U.S. manufacturers and high-tech firms—barred imports of U.S. soybeans and logs, and slapped retaliatory tariffs on American agricultural goods. Chinese regulators also banned the country’s largest firms from buying U.S. Nvidia AI chips and ordered state-funded data centers to use only domestically produced AI chips.

The Busan summit, which lasted a brisk 100 minutes, yielded a temporary truce. The United States agreed to lower the so-called "fentanyl-tariff" on Chinese goods and suspend port fees on Chinese vessels. In exchange, China suspended its rare earth export ban to the U.S. for one year and lifted prohibitions on American soybeans and logs. While the agreement’s text remains unpublished and analysts warn of possible reversals, the ceasefire offers a measure of relief to producers on both sides and is expected to boost investment and trade—at least for now. As AnewZ notes, “the risk of a sudden policy U-turn is noted by pundits, [but] the truce is expected to favor investment and trade.”

Yet, the deal’s significance extends far beyond tariffs and port fees. China’s near-monopoly—controlling approximately 90% of the world’s rare earth processing capacity—has become a potent lever in global supply chains, especially for technology and defense industries. This dominance, as emphasized by AnewZ, poses a direct threat to U.S. national security. American policymakers, particularly in the Trump administration, view reversing China’s control over critical minerals as essential to maintaining the nation’s industrial, technological, and military strength. Legislative efforts such as the Energy Act of 2020, the Inflation Reduction Act of 2022, and the Critical Minerals Act of 2025 all underscore the urgency of securing access to these vital resources.

In response, the U.S. has sought to diversify its supply chains through international partnerships. AnewZ points to recent deals with Australia and the Central Asia-U.S. C5+1 Summit in Washington, where leaders from Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan discussed leveraging their mineral wealth and infrastructure for industrial innovation. The U.S. administration sees these collaborations as crucial to reducing vulnerability to Chinese supply dominance, provided that political and economic stability can be maintained in these regions.

But if the Busan truce signals a pause, it is only a temporary one. Both Washington and Beijing are doubling down on efforts to achieve self-sufficiency in critical technologies. China’s long-term ambitions, articulated in its 15th Five-Year Plan (2026-2030) and its vision for 2049—the centenary of the People’s Republic—are to become a world technological power and the center of global affairs. The use of rare earths as a "nuclear weapon" in economic competition, as AnewZ describes it, highlights the stakes of this new Cold War, where supply chains and tech innovation are the battlegrounds.

Japan, meanwhile, finds itself navigating between these two giants. While Tokyo remains a steadfast ally of Washington, it rejects the notion of a "G2" world dominated by the U.S. and China. As Kiba told Fair Observer, "We maintain autonomy in our own diplomacy." Japan’s preference is for a multipolar system where middle powers retain room to maneuver, supporting the liberal international order but reserving the right to chart their own course.

Elsewhere in the region, ASEAN states remain cautious. While welcoming U.S. engagement, they are skeptical of Washington’s long-term commitments, especially in light of recent global crises. According to Fair Observer, Southeast Asian governments are in “wait and see” mode, neither enthusiastic nor alarmed, but carefully calibrating their positions as the strategic landscape shifts. The next phase of Asian diplomacy, Kiba predicts, will see more "minilaterals" and coalitions built around specific issues such as energy transition, climate cooperation, and supply-chain governance.

As the dust settles on Trump’s Asia tour, one thing is clear: the race for dominance in critical minerals, technology, and global influence is only just beginning. With temporary truces masking deeper strategic divides, the world watches as the U.S., China, and their regional partners maneuver for advantage in a rapidly changing international order.