A potential summit between former President Donald Trump and China’s Xi Jinping is poised to heavily influence the future of agricultural trade, a sector that has served as both a battleground and a stabilizing force in the world’s most consequential bilateral relationship. For investors, the talks may signal whether a fragile truce, established after tariffs reached 34% on many goods, can hold.
“On both sides there is a consensus that U.S.-China stability is important,” said Henrietta Levin, senior fellow for the Freeman Chair in China Studies at the Center for Strategic and International Studies. “Once you get past the question of stability, the ‘what’s next’ in the relationship gets a little more complicated, and so for that reason, the most likely thing to come out of the meeting is very little.”
The trade war, which escalated during Trump’s first term, saw tariffs climb as high as 145 percent before both sides called a truce. An October meeting in South Korea extended the pause for a year, with China promising to purchase soybeans from American farmers in exchange for the U.S. more than halving its tariff rates. However, the underlying issues were never resolved, creating what one former trade negotiator called a “fragile truce.”
At stake is the trajectory of a trade relationship that impacts everything from farm goods to high-tech AI chips. While an agreement could be a bullish signal for the agricultural sector, the talks are fraught with risk. Failure to find common ground could easily reignite punitive economic measures, while a host of other geopolitical issues, including Taiwan and Iran, threaten to complicate negotiations.
The path to the current detente was fraught with escalating economic conflict. The trade war intensified when Trump announced 34% tariffs on all Chinese goods, leading to retaliatory measures from Beijing, including restrictions on rare earth exports. The subsequent truce was a pragmatic step back from the brink, but not a resolution.
“China’s strategy was to promote stability by fighting back,” said Fudan University professor Zhao Minghao. “Both sides could very well issue a comprehensive trade agreement this time. But this doesn’t mean the war is over, and the agreement will have conditions.”
The U.S. has continued to take targeted actions, particularly on technology, while China has implemented new export permit requirements for rare earths and regulations to counter foreign sanctions. The White House has also floated the idea of a new “Board of Trade” to maintain dialogue, but fundamental disagreements remain.
The summit’s agenda extends far beyond agricultural goods and tariffs, encompassing a range of thorny geopolitical issues. Chinese Foreign Minister Wang Yi has identified Taiwan as the “biggest risk” to bilateral ties, a sentiment echoed in recent military drills and sharp rhetoric against the island’s leadership. While the U.S. officially maintains a position of “strategic ambiguity,” its role as Taiwan’s primary arms supplier remains a point of friction.
Furthermore, the U.S. is pressuring China to use its influence with Iran to help end the war that has disrupted the global economy. U.S. Treasury Secretary Scott Bessent recently called on China to pressure Iran to open the Strait of Hormuz, noting that Beijing’s purchase of Iranian oil is, in effect, “funding the largest state sponsor of terrorism.”
Complicating matters further are U.S. restrictions on the export of advanced computer chips. While companies like Nvidia argue for open access to the Chinese market, a push for technological self-reliance within China may render the debate moot. These overlapping pressures create a complex backdrop for any trade negotiations, making a simple, clean resolution on farm exports unlikely.
This article is for informational purposes only and does not constitute investment advice.
