The decision taken by the leaders of the United States of America and China to pause their trade war for a year after their meeting in South Korea on Thursday is cause for a collective sigh of relief globally. Meeting for the first time since 2019, the US president, Donald Trump, and his Chinese counterpart, Xi Jinping, took an hour and forty minutes to conclude a series of interlinked agreements that should calm global markets. China has promised to put on hold fresh restrictions on the export of rare earth minerals. These metals are critical for most hi-tech industries, and China controls around 70% of their supply. Beijing has also assured the US that it will do more to curb the production and smuggling of fentanyl, a synthetic narcotic responsible for the deaths of thousands of Americans every year. In return, the US has slashed its tariffs on Chinese goods from 57% to 47%. Mr Trump has also called off his threat to impose additional 100% tariffs on Chinese products.
Behind this give and take is a shared recognition. Even as the US and China compete for global leadership, challenging each other in every sphere, from Artificial Intelligence to geopolitical influence, they also realise — grudgingly — that they need each other. For all of Mr Trump’s plans to resurrect American manufacturing, the reality today is that without Chinese products most living rooms in the US would look relatively barren. Without Chinese imports, inflation in the US would surge. And without Chinese rare earth metals, US innovators would fall far behind rivals in the technology race. It is equally true that China’s export-driven economy needs American consumerism to thrive. Each of the two nations has tried to wean itself off its dependence on the other. But this will neither be easy, nor will it be quick. Unlike many other nations, China did not fold in front of Mr Trump’s tariff threats. It stood its ground and won a respectable deal. Therein lie lessons for other major economies, including India. Ultimately, Mr Trump craves the success of a deal: China has shown that firm, patient negotiations can yield more balanced agreements than what many others have secured. New Delhi must keep a close eye on the US-China relationship for another reason. Relatively smooth ties between the two, and, resultantly, a calmer Indo-Pacific, may lead to changes in the West’s, and the US’s, equations with India.