Can US-China economic ties regain stability despite rivalry?

The economic relationship between the US and China is often described in dramatic language: decoupling, trade war, containment, retaliation. These terms are not wrong, but they miss an important point. The world’s two largest economies are learning, awkwardly and reluctantly, to manage a relationship that is too large to abandon and too competitive to leave on autopilot.

That is the right lens through which to read the summit from 13-15 May. The meeting did not produce a grand bargain. It did not end the tariff war, settle technology restrictions, or restore the optimism of the early 2000s. But it did something more practical: it pushed the two sides a step closer to a managed economic relationship, in which competition continues, but shocks are reduced.

The corporate atmosphere around the summit reinforced this point. The presence of leading US executives in Beijing was not a minor side event. Senior figures from aviation, finance, technology, payments, food and advanced manufacturing also sought meetings with Chinese agencies and regulators. Their message was straightforward: despite political tension, the Chinese market remains too important to ignore, and American firms still want clearer rules, deeper collaboration and better market access.

Reducing the invisible tax of uncertainty

On 16 May, China’s Ministry of Commerce (MOFCOM) listed five preliminary outcomes from the economic consultations. First, the two sides would continue implementing previous consultation results and had formed a positive consensus on tariff arrangements. Second, they agreed to establish a trade council and an investment council. Third, they would work on agricultural non-tariff barriers and market-access problems. Fourth, they agreed to expand two-way trade, including agricultural trade, through reciprocal tariff reductions on a certain range of products. Fifth, they reached arrangements on China’s purchase of US aircraft as well as US guarantees for the supply of aircraft engines and related parts to China. MOFCOM also stressed that details were still under negotiation and should be finalised as soon as possible.

The terms “trade council” and “investment council” may sound dull. The White House described the same mechanisms as a Board of Trade for non-sensitive goods and a Board of Investment as a government-to-government forum. However named, they are the core of the story. The major cost in US-China commerce today is not only the tariff itself, but uncertainty: whether a tariff will suddenly rise, whether a product will be held at customs, whether a company will be placed on an entity list, or whether an investment will be delayed by a security review.

Uncertainty acts like an invisible tax. A visible tariff can be calculated and, at least partly, passed on through prices. An unpredictable rule change is harder to price. It discourages investment, lengthens supply chains, raises inventories and diverts money from productivity to contingency plans. A permanent channel for trade and investment talks will not eliminate rivalry, but it can reduce the chance that disagreements become shocks.

Turning deals into economic anchors

This is why the summit’s modesty should not be confused with irrelevance. United States Trade Representative (USTR) data show that US-China goods trade totalled about US$414.7 billion in 2025, including US$106.3 billion of US exports and US$308.4 billion of US imports. Services trade added another US$76.9 billion in 2024, with the US recording a services surplus of US$33.2 billion. These figures are too large to be treated as disposable. If the new trade council can identify products for reciprocal tariff reductions, it would lower not only costs but also policy anxiety.

Agriculture is the easiest area for early progress because the economic logic is clear on both sides. According to the White House, China will purchase at least US$17 billion per year of US agricultural products in 2026, prorated, 2027 and 2028, in addition to earlier soybean commitments. It also said China renewed more than 400 US beef-facility listings, added new listings, and resumed poultry imports from states determined by the USDA to be free of highly pathogenic avian influenza. Technical market access may not dominate headlines, but it affects farm incomes, feed costs and inflation expectations.

The aircraft arrangement belongs in the same category. The White House described China’s approval of an initial purchase of 200 American-made Boeing aircraft as its first such commitment since 2017. MOFCOM’s wording was more cautious, emphasising arrangements on aircraft purchases and US assurances on engines and parts. The difference in emphasis is useful: for China, supply assurance matters as much as the purchase order; for the US, the order supports a high-value manufacturing sector.

Where rivalry must be managed

Investment is more difficult, but no less important. SelectUSA data put Chinese FDI stock in the US at about US$40.0 billion in 2024, down from US$52.9 billion in 2020. This decline reflects more than ordinary commercial conditions. It reflects distrust, screening, sanctions risk and the fear that today’s acceptable investment may become tomorrow’s political controversy. An investment council cannot override national-security reviews, but it can help separate genuinely sensitive transactions from ordinary business projects. That distinction is crucial if both countries want less panic and more discipline in economic statecraft.

Technology remains the hardest part of the relationship, and it is unrealistic to expect any summit to solve it. The US Entity List requires licences for exports, reexports or in-country transfers involving listed parties, and licence exceptions are generally unavailable. The Center for Strategic and International Studies (CSIS) has noted how rapidly the control environment has expanded, with Chinese additions to the Entity List rising from an average of 10 per year in 2014-2018 to 154 in 2023 and 264 in 2024. For ordinary readers, the implication is simple: tariffs make trade more expensive, but export controls can make some trade impossible.

Rare earths and critical minerals show the other side of the same problem. The White House said China would address US concerns over shortages involving materials such as yttrium, scandium, neodymium and indium, as well as restrictions on related production and processing equipment. This is why “managed relationship” is more realistic than “improved relationship”. Both sides are trying to become less vulnerable while keeping enough leverage over the other. That is rivalry, not friendship. But rivalry still needs rules.

The road ahead

Here lies the significance of another summit later in the year. The White House said Trump would welcome Xi to Washington in the fall. A future leaders’ meeting gives officials a calendar, and a calendar creates deadlines. Tariff lists can be prepared, agricultural registrations processed, aircraft details negotiated, and investment channels clarified. Businesses do not need to believe in a new golden age. They only need to believe that both governments have incentives to avoid sudden deterioration before the next round.

The right conclusion, therefore, is neither celebration nor cynicism. The May summit did not remove the fundamental competition between the two countries. It did not reverse the bipartisan US consensus in favour of constraining China in sensitive technologies. It did not persuade China to accept US dominance in advanced industries. These structural forces will remain.

Yet the summit did point towards a path: not full reconciliation, not simple decoupling, but managed economic coexistence. The outcomes, though still lacking in details, address the areas where stabilisation can begin: tariffs, councils, agricultural access, reciprocal trade expansion, investment channels, critical minerals and aviation supply. When two friendly economies trade, they need little machinery. When two rival economies trade, institutions become essential.

The same logic also applies to artificial intelligence (AI). Although AI was not listed among both countries’ main deliverables, it was not absent from the summit. China later confirmed that the two leaders had constructive exchanges on AI and agreed to launch an intergovernmental dialogue on AI governance; Trump also referred to possible cooperation on guardrails.

This matters economically because AI is becoming a general-purpose driver of productivity, industrial upgrading, finance, logistics, healthcare, education and national competitiveness. If the two largest economies treat AI only as a battlefield, the costs will spill into standards, data flows, safety rules and the diffusion of productivity gains. Trust is limited, but a managed economic relationship that excludes AI would be incomplete.

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