The meeting between United States President Donald Trump and Chinese President Xi Jinping is being closely watched worldwide, as any agreement reached could have profound consequences for the global economy.
The two leaders met for the first time since 2019 on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in South Korea, aiming to ease tensions that have plagued trade relations between Washington and Beijing.
As the world’s two largest economies, the US and China wield immense influence over global stability and prosperity. Together, they account for nearly 43% of global GDP and almost half of worldwide manufacturing output, with bilateral trade reaching approximately $585 billion in 2024 alone.
A full-scale trade war or economic decoupling between the two nations would severely impact global growth. The World Trade Organisation estimates splitting the world into two rival economic blocs could reduce global GDP by nearly 7% in the long term.
Director of the Asia Global Institute Heiwai Tang told Al Jazeera, “The US-China relationship is the most important bilateral relationship. Any de-escalation in their tension will have significant implications for themselves and more so for smaller economies that rely on trade with either of the superpowers.
“The question is how long the agreements, whether it’s about China’s purchasing more soybeans or the US lowering tariffs on China, can last.”
The summit follows months of trade confrontations, including Beijing’s announcement earlier this month to impose strict export controls on rare earth elements- critical for products ranging from smartphones to fighter jets. Trump responded by threatening an additional 100% tariff on Chinese goods, heightening fears of a near-total trade blockade.
Henry Gao, an international trade expert at Singapore Management University, said, “These measures, if enforced, would have devastating effects on the global economy- and could easily backfire on their own economies. That’s why I’ve always maintained that these tools will be brandished, not deployed, to pressure the other side back to the negotiating table.”
US officials, however, have signaled a desire to avoid escalation. US Treasury Secretary Scott Bessent indicated that Trump and Xi may agree to defer China’s export controls and postpone higher US tariffs.
Rolf J Langhammer, a researcher at Germany’s Kiel Institute for the World Economy, told Al Jazeera, “De-escalating the trade war, and perhaps even more important, the tech war, is of huge importance for the world economy, which got terribly hit by the shocks and the uncertainty triggered by the US president after 2 April.
“It could, at least for the time being, stabilise expectations and thus motivate investors to take a medium-term perspective for their decisions rather than delaying them due to fears of further overnight shocks.”
Despite tensions, global trade has so far been relatively resilient, with exporters shifting focus to Southeast Asia, Latin America, Europe, and Africa. The IMF recently revised its 2025 GDP growth forecast upward to 3.2% from 2.85% in April, following delays or reductions in many of Trump’s proposed tariffs.
Still, the long-term outlook remains uncertain. Analysts caution that fundamental differences between the US and Chinese economic models are unlikely to disappear.
Jacob Gunter, an analyst at the Mercator Institute for China Studies in Berlin, said, “These irreconcilable differences exist. It is difficult to imagine China abandoning its export-oriented model of state-led investment, or the US fully opening up to Chinese imports and lifting its controls on Chinese technology.
“I just don’t see any deal that would be sufficient enough to meet the interests and values of both parties that wouldn’t come at the expense of the other party.”
While the summit may temporarily cool tensions, the global economy remains deeply exposed to the trajectory of US-China relations.
