High-Stakes Call Between Trump and Xi Jinping

The US and China are at a critical juncture in their economic and political relationship as President Donald Trump and President Xi Jinping prepare for talks expected to shape the future of global trade. The immediate focus surrounds the fate of TikTok, the viral video-sharing app, whose continued operation in the US has turned into a bargaining chip amidst a broader trade deadlock. American officials say the long-awaited call will be the harbinger for potential in-person summits and may lead to a tentative easing of measures that have battered businesses and shaken financial markets worldwide.

The stakes are high: reciprocal tariffs—some as steep as 50% and justified by Trump under the International Emergency Economic Powers Act (IEEPA) of 1977—are set to take effect this November unless a compromise is reached. This scenario has placed additional stress on American imports from China and prompted retaliation from Beijing, impacting a multitude of sectors, from technology to agriculture and automotive manufacturing.

TikTok and Tech Policy at the Forefront

TikTok remains emblematic of the strategic rivalry between Washington and Beijing. With over 170 million monthly users in the US, TikTok has faced multiple threats of bans and forced divestitures due to national security and data privacy concerns involving its Chinese parent, ByteDance. Lawmakers continue to debate policies requiring ByteDance to sell its US operations to American buyers, citing the protection of user data. Despite bipartisan support for restrictions, actual enforcement has seen a series of court challenges and implementation delays.

Amid these wranglings, China’s government has attempted to exert counter-pressure by regulating the exports of its own critical technologies, such as rare earth minerals and AI algorithms, further complicating negotiations. Recent reports indicate that China has dropped an antitrust probe into Google as a sign of goodwill during negotiations, but concurrently pressed ahead with an antitrust case against Nvidia, effectively restricting Chinese firms from purchasing Nvidia’s high-performance AI chips.

Tariff Impact Spanning Global Supply Chains

The US-China trade war, reignited by Trump’s new round of tariffs, continues to ripple through global value chains. Companies such as GSK, which recently announced a $30 billion investment in US research and supply chain infrastructure, are actively reshuffling operations to hedge against growing costs and import risks. The pharmaceutical sector is particularly in focus as Trump threatens pharmaceutical import tariffs to boost domestic manufacturing. Bristol Myers Squibb’s decision to sell a 60% stake in a Chinese joint venture further exemplifies the growing trend of Western multinationals de-risking from China exposure.

Elsewhere, FedEx and other logistics providers anticipate a sharp profit drop after the elimination of tariff exemptions (for parcels under $800), directly affecting e-commerce and global shipping. Automakers in Japan and Europe are bracing for potential new US national security tariffs, with August export data already showing sharp declines in Japanese shipments. Meanwhile, Swiss watchmakers and luxury goods companies report plunging US sales as additional tariffs squeeze consumer demand and force up retail prices.

China’s Strategic Trade Retaliation: Agriculture, Soy, and Technology

China has historically leveraged its import policy, particularly around US agricultural commodities, as leverage in trade disputes. In a striking move, Beijing is shunning US soybeans at the start of the 2025 export season—the first time since the 1990s—further straining already tense relations and increasing pain for American farmers. The Trump administration, in response, is drawing up plans to use tariff revenues to fund direct bailouts for affected US farmers, a controversial step aimed at cushioning the political and economic fallout in rural regions.

Meanwhile, China’s sanctions and regulatory retaliation have expanded to hit American technology champions. Its ongoing probe into Nvidia’s 2020 chip acquisition and the effective ban on Nvidia’s AI chips for Chinese tech giants signal a willingness from Beijing to target high-growth, strategic sectors in retaliation.

International and Domestic Ripple Effects

Beyond the US and China, Trump’s trade policy is forcing adjustments across major economies. The UK, under pressure from domestic steelmakers, has suspended negotiations with Washington regarding the removal of steel tariffs, choosing to maintain current duties. South Korea remains resistant to US demands for a “Japan-style” trade deal, while the EU has postponed its latest round of Russia sanctions at Washington’s urging, revealing intensified global coordination (and friction) among traditional allies as they navigate the shifting trade order.

The Bank of Japan, responding to global uncertainties, opted to hold interest rates steady but indicated future hikes will depend on further tariff impacts, underscoring the wider monetary ramifications of trade disruption. Similarly, equity markets and multinational corporations are adopting a “wait and see” approach—markets have thus far responded with what Reuters characterized as a “remarkable shrug,” but volatility measures are rising as key trade deadlines near.

Supreme Court Weighs in on Tariffs

On the legal front, the US Supreme Court is fast-tracking a case that challenges the constitutionality of Trump’s sweeping reciprocal tariffs under the IEEPA—a ruling expected as early as this fall. While the appellate courts have allowed tariffs to remain for now, the case could determine the future executive authority for unilateral trade measures and bring further uncertainty for markets and companies dependent on stable international pricing.

Outlook: Cautious Optimism and Ongoing Uncertainty

Despite headline risks, there is caution and some optimism. US Treasury Secretary Scott Bessent has publicly stated his confidence in reaching a US-China trade accord before reciprocal tariffs activate in November. Negotiators remain engaged, and financial markets, though jittery, are yet to price in a major policy shift.

Ultimately, the upcoming Trump-Xi call will play a decisive role in charting the next phase of the US-China trade relationship. As supply chains reorganize, regulatory and political uncertainty is likely to persist, with both governments and the global business community facing continued turbulence as they adapt to new realities of cross-border commerce and tech competition.