AA Edit | World Economy Breathes Easy After Trump Meets Xi

Having caused havoc to world trade in a tussle with the world's second largest economy, US President Donald Trump said he had made deals with Chinese supremo Xi Jinping in a100-minute meeting in Busan in South Korea. Accustomed as the world has become to dealing with the huge gaps between what he says and what he does, a ‘pause’ might have been struck on the worry and anxiety button. But to believe all problems have been summarily resolved is to believe that an unpredictable Trump may be inclined to match words with action this time.

A 10 per cent drop in US tariffs — from 57 per cent to 47 per cent — in return for China dropping restrictions on export of rare earths (for a year) is the point at which reason may be thought to have begun and a beginning of the end of a trade war that rent global trade asunder in disrupting supply chains and sending all nations scurrying for deals with the US or diversification of their export destinations may have been spotted.

The last six months have been chaotic since high tariffs and punitive secondary tariffs kicked in at the transactional US President’s capricious whims and fancies, with India one of the worst hit along with China and Brazil. Being blamed for filling Russian coffers with oil money that supports his Ukraine war was discriminatory with a Peace Nobel-seeking President using India for leverage.

The question now is whether there is a genuine change of heart in Trump that has led him to suggest trade deals are imminent with India and Brazil while the ‘fentanyl’ punishment on China is being eased even as substantial points have been covered in bridging differences with China, according to comments from Trump on board Air Force One back to the US and official China media quoting Xi Jinping’s responses to the person-to-person meeting between the two that took place after six years.

Again, it is moot whether Trump realises that any tariff is a levy on imports that the American would have to pay from his pocket. Since he even punished Canada for reproducing an opinion held by Ronald Reagan against tariffs, it is hard to predict it will be smooth sailing from 2026 onwards by when most of Trumpian tariff tantrums should have played out and some order restored to global trade.

Fingers crossed might well be the appropriate action as India awaits word on Trump signing off on a trade deal that should logically follow as India justifies tapering off purchases of Russian oil on the grounds that the US sanctions must be complied with. While China might oblige the US in buying soybeans to gladden Trump and US farmers’ hearts, India might be in a dilemma on that sticking point.

Only the suggestion that Trump seems to be backing off from extreme positions even as he touts his achievements in bringing Americans lesser prices at the petrol pump and the grocery shelves of supermarkets might be the silver lining spotted after months of universal turmoil. It is good then that, despite all the bombast and punitive actions, the world’s largest economies realised that they could not risk blowing up the world economy amid their fight caused by the US's yawning trade deficit with China.