A breakthrough in trade relations between the United States and China could soon reshape the global economic outlook as Presidents Donald Trump and Xi Jinping meet face-to-face for the first time since 2019 at the Asia-Pacific Economic Cooperation (APEC) summit in South Korea.
The two leaders are expected to discuss measures aimed at easing tensions that have flared between Washington and Beijing in recent months. Experts say any agreement reached will reverberate across the global economy, given the two nations’ combined influence. Together, the US and China account for 43 percent of global GDP and nearly half of global manufacturing output, with bilateral trade reaching $585 billion in 2024.
A prolonged trade standoff or full economic decoupling could have devastating effects. The World Trade Organization warns that a global split into US- and China-led blocs could shrink global GDP by up to 7 percent over time.
“The US-China relationship is the most important bilateral relationship in the world,” said Heiwai Tang, Director of the Asia Global Institute in Hong Kong. “Any easing of tension will significantly impact smaller economies that depend on trade with either superpower.”
Recent weeks have seen renewed escalation, with Beijing announcing export restrictions on rare earth materials—vital to industries from smartphones to defense—while Trump threatened 100 percent tariffs on Chinese imports. Analysts, however, believe these moves are intended more as negotiating leverage than firm policy.
“If fully enforced, these actions would devastate global trade,” said Henry Gao, an international trade expert at Singapore Management University. “But they’re likely bargaining tools meant to bring both sides back to the table.”
US officials have hinted that both nations will likely agree to suspend the new tariffs and export restrictions. “De-escalating both the trade and tech wars is critical for global recovery,” said Rolf J. Langhammer of the Kiel Institute for the World Economy. “Stabilizing expectations could restore investor confidence and prevent further economic shocks.”
Despite recent volatility, the International Monetary Fund (IMF) has raised its global growth forecast for 2025 to 3.2 percent, up from 2.8 percent earlier this year, crediting cautious optimism that tensions might ease.
Still, long-term reconciliation between the two economic powers remains uncertain. Analysts say fundamental differences between the US free-market model and China’s state-driven economy continue to pose structural challenges.
“After decades of mutual benefit, the two systems are increasingly at odds,” said Jacob Gunter of the Mercator Institute for China Studies. “It’s hard to imagine a deal that satisfies both without major compromises.”
For now, the world watches as Trump and Xi meet in Gyeongju, hoping their handshake could cool a trade war whose consequences extend far beyond Washington and Beijing.
