Why Markets Love the Trump-Xi Truce But Geopolitics Stay Frozen: Rare Earths, Fentanyl, and Russia’s Energy Lifeline
The meeting between Donald Trump and Xi Jinping in Busan – their first face-to-face in six years – came after weeks of mutual threats: Trump brandishing 100 % tariffs, China announcing expanded export controls on rare-earth minerals. Yet behind closed doors, in a conversation that lasted just over an hour and a half, a de-escalation was agreed: Washington is temporarily withdrawing part of its tariff offensive, Beijing is buying time and signalling stability in the supply of critical raw materials.
Specifically, a ten-percentage-point reduction in U.S. tariffs on Chinese imports was announced (from an average of ~57 % to ~47 %). In return, China committed to immediately resuming large-scale purchases of American agricultural products, especially soybeans – giving Trump politically vital breathing room for his industrial and farming base. Beijing, for its part, is postponing the expansion of rare-earth export restrictions for at least a year – a move that is crucial for the global electronics, automotive and defence industries.
A political-security exchange was also reached: stronger Chinese controls on fentanyl precursors in return for the U.S. lowering some tariffs. This quid pro quo fits Trump’s familiar pattern of using trade as leverage for domestic political points – a quick, visible “deal” that deliberately avoids the hardest structural issues. Those issues – semiconductors, AI, TikTok, Huawei – were consciously pushed to a later date. In other words, a tactical pause, not a strategic pivot.
The short-term consequences of this package are fairly clear. Markets have breathed a sigh of relief, supply chains have gained an extra year without a rare-earth shock, and American farmers see demand unlocked. At the same time, the very fact of de-escalation reduces the risk of a domino effect of retaliatory tariffs that had threatened global growth in recent months. In the medium term, however, none of this alters the underlying trend of partial economic decoupling in high technology and financial flows.
Can the U.S. and China really be trade partners, or is this merely a truce? It is more realistic to speak of a “cold peace” with transactional pockets of cooperation. Both sides have reasons to ease tensions now: Washington needs an anti-inflation valve and wins for the industrial Midwest, Beijing wants to stabilise growth and avoid hits to critical inputs. But the logic of the system – technological rivalry, supply-chain control, security reflexes – will push them back toward separation as soon as the first deadlines expire.
The biggest test of the partnership will be precisely what was left unsaid. If high-tech controls remain in place (and everything suggests they will), cooperation will be limited to commodities and selective exceptions. That is not insignificant – raw materials and agriculture carry real money and jobs – but it does not change the fact that semiconductors, advanced equipment and software are the heart of modern power. In those fields Washington is building walls while Beijing accelerates self-sufficiency; there is no compromise there yet.
The most sensitive geopolitical element of Busan is its effect on Russia and the war in Ukraine. Trump made clear he wants “Chinese help” in reducing Russian energy revenues. This is an old Washington wish: to break the China–Russia axis by economically deterring Beijing from buying Russian barrels and cubic metres. Yet China’s calculus remains firm – deep discounts, supply security and the political value of a partner Russia in a multipolar world are unlikely to be traded away for American concessions on soybeans or tariffs. Beijing can tactically adjust the pace and routes of purchases, but strategically detaching from Moscow would run counter to its own long-term interests.
For Moscow, therefore, this “quiet pause” between Washington and Beijing is not an alarm bell but a reminder that both giants are simply buying time. If China maintains stable energy volumes in the coming months, the impact on Russia’s budget will remain limited. Even in a scenario of partial Chinese “cooling” of purchases, global market mechanisms would find other channels – rerouting through third countries or new discounts that again feed demand. The West’s sanctions architecture has already proved porous; the Chinese factor is the safety valve against total strangulation.
It is worth comparing the “India precedent”. In recent months Washington, using a mix of political pressure and threats of secondary sanctions, has reduced India’s imports of Russian energy. But India and China are not in the same league. With New Delhi it was possible to play the lever of security cooperation and “partner against China”; with Beijing the only realistic lever is concession. Busan confirms it: carrot instead of stick, trade respite instead of blackmail. The goal is similar – to cut Russian revenues – but the instrument is no longer pressure but an attempt to “buy” Chinese restraint.
Will it succeed? From Beijing’s perspective, the concessions it received – which it can quickly reverse if Washington returns to escalation – are worthwhile only if they turn into a more lasting framework. If, however, the high-tech embargo continues to tighten and financial restrictions widen, there is no rational reason for China to sacrifice a stable, discount-fuelled energy channel from Russia. On the contrary, history teaches that Chinese diplomacy uses such truces to diversify options and reduce dependence on any single Western lever.
The European dimension does not look good. EU industry gets a short reprieve on rare earths, but strategically it remains reduced to spectator status. If Washington and Beijing transactionally sort out tariffs and soybeans while continuing technological decoupling, European factories and research centres will be caught in a vice – more expensive inputs and reduced market access. Brussels likes to talk about “de-risking”, but without its own strategic raw-material and technology policy that is just a euphemism for waiting on other people’s decisions.
For the Global South, Busan sends a message of predictability: no sudden blockade of critical metals, no tariff shock that drives up food and consumer-goods prices. That is good news. But at the same time the world receives confirmation that a “great-power truce” rests on interchangeable, short-term packages – meaning that one bad episode, one election cycle or one security incident can send everything backwards again. That is why markets are cautious and euphoria is absent.
What comes next? If the announced tariff cuts are administratively implemented quickly and Chinese soybean purchases really start “immediately”, confidence will rise. If Beijing keeps the rare-earth valve open throughout the year, industry will feel that air very soon. But the real litmus test will be the spring meetings the two leaders announced – Trump in Beijing, Xi in the U.S. If those take place and deliver at least minimal security mechanisms (e.g. military communication channels to avoid incidents), then Busan can become more than strong PR.
In the meantime the calculus remains earthbound. The U.S. and China can be partners in narrow economic bands where interests overlap and the cost of conflict is too high – energy, food prices, rare metals, parts of the automotive chain. In everything that touches technological and military advantage, they remain rivals. That duality – cooperation in the shallow, competition in the deep – is the real diagnosis of our moment.
For the war in Ukraine it means Busan will not produce a “miraculous” joint U.S.–Chinese squeeze on Moscow. Beijing will preserve space for peace rhetoric and tactical adjustments, but without renouncing the key energy link. Washington will try to sell the narrative of “Chinese responsibility” and perhaps extract symbolic restrictions, but without changing the strategic picture. On the ground, the war will continue to be decided by the balance of industrial capacities and political will, not by Busan smiles.
In conclusion: Busan is a purchase of time. A good and necessary respite that lowers the temperature, restores a grain of predictability and shows that neither Washington nor Beijing has an appetite for a new round of tariff war right now. But it is a truce, not peace. Anyone who mistakes it for partnership will soon be disappointed. And anyone who uses it to broadly restructure supply chains and strengthen autonomy – as both China and Russia are doing – will be better prepared for the next storm.
About the Author
