Trump-Xi’s Temporary Truce: What It Means for Taiwan

If the aim of the 30 October meeting between United States President Donald Trump and Chinese President Xi Jinping, in Busan, South Korea, was to ease trade tensions, it can be judged as just about achieved. US ‘fentanyl tariffs’ on China were halved to 10%, bringing US tariff levels on imports from China closer to those applied to other Asian economies.In return, China agreed to resume US soybean imports – hardly a breakthrough – and, more importantly, to postpone export controls on five rare earth elements (REEs) announced earlier in October. However, separate Chinese export controls announced in April on seven REEs, including gallium and germanium, both critical for the defence and semiconductor industries, remain firmly in place. In other words, Trump has not managed to turn back the clock on REEs, leaving China with a potent strategic lever for future disputes.However, China’s upper hand in this deal is more limited than it might have hoped. Xi might have wanted to raise the question of Taiwan and secure a US assurance that it would not support formal Taiwanese independence, but this did not materialise. Beijing also pushed for Washington to lift export controls on Nvidia’s latest artificial intelligence semiconductors (the Blackwell B30A), but Trump appears to have stood firm.Finally, the US-China agreement arising from the meeting carries a one-year expiration date, underscoring its fragility. Based on precedent, it could unravel sooner – perhaps abruptly – should either side choose to withdraw. To hearten markets that had been expecting more substantial progress on market access and Chinese investment in the US, Trump said that he would visit Beijing in April.It therefore looks like the US and China have agreed a truce, for now. Markets have reacted with justified caution. Yet investors may still be underestimating the risks of Trump’s shift from economic to hard-power coercion. Hours before meeting Xi, Trump ordered the Pentagon to resume nuclear testing – last done in 1992.This shift should not be a surprise. China has been expanding its nuclear arsenal, but the US maintains clear superiority in nuclear capabilities. Trump may seek to use this advantage to tighten alliances. Two recent announcements reinforce this interpretation: the US commitment to the Australia – United Kingdom – US (AUKUS) security arrangement, and US approval of a South Korean nuclear submarine, both announced shortly before the Busan meeting.Overall, the summit avoided the worst outcomes – no direct clash over Taiwan, no new deal on advanced chips – but it still revealed US vulnerability in using economic pressure against China. The US gains are minimal (soy exports and a partial reprieve on REE restrictions) and come at the cost of exposing economic dependence on China. Meanwhile, China retains its supply-chain advantage, though with heightened awareness that the stakes – and the mutual mistrust – are higher than ever. China may have a short-term tactical edge, but Trump’s pivot toward overt military signalling could mark a more dangerous phase.Notably absent from the agenda was Taiwan, a perennial flashpoint in U.S.-China relations. Trump explicitly stated that "Taiwan never came up," implying China may have backed off pushing the issue despite prior suggestions it could be broached. This omission seems to signal that Washington's firm stance against concessions on the island's status. Ahead of the talks, U.S. Secretary of State Marco Rubio proactively reassured Taiwanese officials, emphasizing that the U.S. commitment to Taiwan remains unaltered and that no major concessions would be made in trade negotiations with Beijing. Rubio's outreach, including a call with Chinese Foreign Minister Wang Yi, underscored this resolve, calming fears in Taipei that the democratic ally might be traded away for broader deal-making. Taiwan's Foreign Minister Lin Chia-lung echoed this confidence, affirming strong bilateral ties despite the high-stakes backdrop. For now, this diplomatic firewall preserves U.S. support for Taiwan's security, averting immediate escalations over issues like arms sales or the Taiwan Strait.Economically, however, the summit tilts the scales toward Beijing. The fentanyl tariff cut enhances China's export competitiveness, particularly in chemicals and precursors, allowing faster market penetration into the U.S. Taiwan, meanwhile, languishes under a 20% reciprocal tariff on its imports—imposed earlier this year without reciprocal relief—burdening traditional sectors like electronics assembly, textiles, and machinery. These industries, already squeezed by fierce competition from China – with the weak RMB against the Taiwan dollar, now face even more pressure from lower US tariffs on China.The question then is whether Taiwan can manage to reach a better deal with the US soon, lowering tariffs from the current 20% level. Optimists point to shared interests in semiconductors and supply-chain resilience, where Taiwan's TSMC holds leverage. However, Washington -through Commerce Secretary Howard Lutnick -came with quite a strong request in early October, the so-called "50-50" rule requiring Taiwan to produce half of its advanced semiconductors—particularly those destined for the U.S. market—on American soil. Taiwan’s government has firmly rejected the proposal, with Vice Premier Cheng Wen-tsan stating on October 1 that the island will not agree to such conditions, citing logistical impossibilities and the need to maintain its global edge in chip fabrication through TSMC. Despite ongoing trade talks showing progress as of October 31, the 50-50 demand remains a sticking point.All in all, the truce to the economic war between the US and China reached by Trump and Xi is a fragile pause with implications for Taiwan. With midterm elections in the US and domestic pressures a flare-up in the complicated relation could happen any time so Taiwan must be more alert than ever. *This is a reprint. The comment was published by CommonWealth Magazine./article/article.action?id=4429