Gyeongju, South Korea – Presidents Donald Trump and Xi Jinping are poised for their first in-person meeting since 2019, a highly anticipated encounter that is expected to pave the way for a significant agreement aimed at alleviating trade tensions between the United States and China. This meeting will take place as part of the Asia-Pacific Economic Cooperation (APEC) summit, and the outcomes could have far-reaching implications for the global economy.
The United States and China, the world’s two largest economic powers, together contribute a remarkable 43 percent of global gross domestic product (GDP) and almost half of the global manufacturing output. In 2024 alone, the trade between the two nations totaled approximately 5 billion. A potential escalation in trade hostilities, or a full-scale trade war, could severely disrupt global economic growth, a concern underscored by the World Trade Organization’s projection that a divided world economy could result in a reduction of nearly 7 percent in global GDP over the long term.
The importance of the US-China relationship cannot be overstated, as both nations wield considerable influence on the stability and prosperity of smaller economies that depend on their trade dynamics. As noted by experts, any reduction in tensions between these superpowers will have substantial benefits not only for themselves but also for nations globally that are intrinsically linked to this bilateral trade relationship.
In advance of this crucial summit, the backdrop of increased threats of trade escalations looms large. Recently, Beijing announced stricter export controls on rare earth elements, essential for various manufacturing sectors, from smartphones to military technologies, causing apprehension regarding disruptions to global supply chains. In reaction, President Trump has suggested imposing a 100 percent tariff on Chinese goods, raising concerns about a potential trade embargo.
Experts view these aggressive measures as likely strategic maneuvers for leverage in negotiations rather than genuine policy implementations. If these tariffs were to be enacted, they could have devastating repercussions for both economies.
Looking ahead, US officials signal that President Trump and President Xi are likely to focus on de-escalation strategies, potentially deferring the proposed tariffs and export controls. This approach is viewed as crucial for restoring stability to a world economy still recovering from the uncertainties triggered by recent trade policies.
Meanwhile, the International Monetary Fund has upgraded its GDP growth forecast for 2025, attributing this positive outlook to a cautious optimism surrounding US-China relations.
Although the upcoming meeting suggests a temporary cooling of hostilities, experts speculate that fundamental differences in the economic models and strategic priorities of the US and China may continue to challenge the prospects for long-term resolution. As these two nations navigate their complex relationship, the eyes of the world remain fixed on Gyeongju for developments that could redefine global economic interactions.
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