Trump trades beans for semiconductors to land China truce deal

Donald Trump and Xi Jinping have made trade concessions after a summit in South Korea - Mark Schiefelbein/The Associated Press

Donald Trump and Xi Jinping have, once again, fought each other to a standstill.

Both the US president and the Chinese leader made concessions after a summit in South Korea, in an effort to avert what appeared to be a re-escalation of their trade war.

The details are still hazy, but the biggest tit-for-tat deal looks to have been on beans and chips. China will resume buying American soya beans and the US will ease exports of Nvidia’s microchips.

Trump’s self-congratulatory post on his Truth Social platform put the revival of the $12bn (£9.1bn) soya bean export trade at the top of his list of wins.

“Our farmers will be very happy! In fact, as I said once before during my first administration, farmers should immediately go out and buy more land and larger tractors. I would like to thank President Xi for this!” he said.

The Chinese Commerce Ministry readout was more circumspect. “Both sides reached a consensus on issues such as expanding agricultural trade,” the statement said.

China typically buys about half of the American crop, but Beijing abruptly halted trade in May. This sent shock waves through the Midwest farm belt – a key swing-state battleground in US elections.

The Chinese deftly pivoted to soya farmers in Brazil and Argentina instead to pressure Trump. (This had a knock-on effect for Argentine president Javier Milei: American politicians questioned whether Trump should bail out his ideological ally when the Argentinian was allowing the sale of beans to Beijing at US expense.)

China already this week made its first conciliatory order of US soya beans. But its shopping trolley is full of South American produce, so it may be a while before Beijing can really start buying US beans in significant quantities.

Treasury Secretary Scott Bessent said on Thursday that China would purchase 12 million metric tonnes of soya beans this season, about half of what it had been buying each year before the import freeze.

However quickly the soybean shipments restart, Xi has shown Trump that he’s prepared to weaponise the trade. And Trump has shown Xi that he’s vulnerable.

Trump’s weapon

This may be why Trump has not fully holstered his own weapon: the semiconductor and chip trade.

He didn’t mention chips in his Truth Social post and was vague with reporters on Air Force One. He told them that Beijing should keep talking directly to Nvidia, and that he and Xi had not discussed access to the company’s state-of-the-art Blackwell chip.

He promised to elaborate further in due course. He has already allowed the sale of chips to China in exchange for the White House getting a cut of the proceeds.

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China is busily trying to cut its dependence on American semiconductor technology. But it can’t do so quickly enough, and without running the risk of falling behind in the AI arms race.

China’s ability to buy American chips could potentially have evaporated altogether after the US introduced an exacting new set of export controls on Sept 29.

This prompted Beijing to announce two weeks later that it would ramp up its own export controls on rare earths, where it has a near-monopoly on refined materials and magnets that are critical to the US military and its auto industry.

‘Study and refine specific plans’

On Thursday, Xi and Trump agreed to suspend their new rules for one year.

While both sides have laid their guns on the table, they’re still loaded. Beijing said that during the 12-month pause, it would “study and refine specific plans” for its rare earth export regime.

Trump merely expressed relief. “China has agreed to continue the flow of rare earth, critical minerals, magnets, etc, openly and freely,” he said on Truth Social, which is the site where just a few weeks ago he had threatened a 100pc tariff in retaliation for Beijing’s move.

Instead, on Thursday, the tariff was cut. Trump halved the 20pc levy that is related to his crusade against fentanyl – a highly addictive synthetic opioid blighting America.

“China has strongly stated that it will work diligently with us to stop the flow of fentanyl into our country. They will help us end the fentanyl crisis,” the US president said on Truth Social.

Capital Economics on Thursday estimated that the effective US tariff rate on China now stands at 30pc, which is still higher than on almost any other country bar India and Brazil.

But Xi has learned this year that Trump’s tariffs are not delivering the kind of pain Beijing might have expected or feared.

Chinese exports jumped 8.3pc in September from a year earlier. Although shipments to the US dived 27pc, a falling renminbi meant that exports to the rest of the world grew almost 15pc, the fastest in more than two years. The country is still on track to meet its 5pc GDP growth target for 2025.

Nine months after Trump took office, Beijing and Washington now have a clear understanding of their own strengths and weaknesses, as well as those of their opponents.

Neither can land a knockout blow on the other, at least without risking a mortal punch themselves. A rolling series of annual agreements looks in prospect, with all the unpredictable theatre of Trump’s beloved mixed martial arts.

The chances of an unexpected blow-up remain high. But it does now seem that the two sides are willing and able to de-escalate.

Beijing said the deal agreed on Thursday should “inject greater certainty and stability into China-US trade cooperation and the global economy”.

But real stability will ultimately come from another, more expensive source. Both sides will try to restructure their economies to make them impervious to a trade war, cleaving the global economy into two blocs.

The rest of the world may need to pick a side or be caught in the crossfire.

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