President Donald Trump and Chinese leader Xi Jinping meet in Washington this week for their second face-to-face summit of the year, aiming to shore up a fragile trade truce. Artificial intelligence, Iran-related sanctions, and unresolved tariffs threaten to complicate the talks even as both sides signal a preference for stability.
A truce under strain
Trump and Xi are set to meet face-to-face in Washington this week for the second time this year, seeking to strengthen a trade truce that both sides have kept alive despite continued friction. The two governments keep lobbing accusations and launching retaliatory trade actions even as they prepare for the summit.
Treasury Secretary Scott Bessent said the mutual respect Trump and Xi have for each other trickles down to broader negotiations, but he added that some deliverables from last year's Busan agreement have not been completely fulfilled by China. China expert Claire Reade of the Center for Strategic and International Studies described the dynamic this way. According to CNBC: "A number of inconsistent viewpoints seem to be jostling each other".
Tariffs remain elevated
Last year's trade war pushed U.S. levies on Chinese imports to 145% at their peak, with Beijing's retaliatory duties reaching 125%. Those rates were later slashed and extended through a series of deals, culminating in the Busan agreement, which expires Nov. 10.
Despite the cooldown, the effective U.S. tariff rate on Chinese products stood at 22.8% as of July, the highest among major American trading partners, according to the Penn Wharton Budget Model. The Congressional Research Service put the U.S. average tariff on China even higher, at roughly 36.5%, against Beijing's 31% rate on U.S. goods. The U.S. goods trade deficit with China this year remains among the highest in the world at roughly $91.2 billion, even though total goods trade between the countries fell sharply in 2025.
Bank of America Global Research analysts said a one-year extension of the truce is their most likely scenario, and said China could agree to buy additional U.S. goods, potentially including more Boeing aircraft. Bessent said Monday he expects the tariff truce to hold and pointed to progress on a reciprocal $30 billion tariff reduction proposal floated by Beijing earlier this month.
AI and Iran sanctions loom
Bessent has said artificial intelligence will top the agenda, as the U.S. and China compete for leadership in the industry. Bessent said the two sides discussed establishing a dialogue to notify each other about AI incidents.
Iran-related sanctions could also weigh on the talks, since China remains Tehran's top trading partner. Bessent confirmed that sanctions came up during weekend meetings with Chinese officials, adding that Chinese financial authorities have been engaged in the discussions.
Source: CNBC
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