How long will the Sino-American truce last?

By: Beatrice E. Rangel - 28/10/2025

President Trump announced to reporters traveling with him to Asia the finalization of an agreement with China, explaining it by saying, "We want to make a deal, and they want to make a deal." And he's certainly not wrong about that. But since the devil hides in the details, the content of a deal for both the United States and China must be dissected.

For the United States, a deal means restricting the transfer of technology from its territory to China to prevent it from gaining ground in the field of artificial intelligence, gaining access to rare earth elements used to build semiconductors and microprocessors, and, of course, respecting Taiwan's independence. For China, a deal means codifying its status as a power in the East; respecting its right to trade with whomever it wants, however and whenever it wants, and ceasing to incite Taiwan.

It is clear that while there are two areas in which an agreement can be reached, the Taiwan issue is insoluble. For the United States, Taiwan is an independent nation, while for China, it is a province. This disagreement is not new. It has always been on the American agenda. Already in Kissinger's time, the United States attempted to include the status of a free nation for Taiwan in the agreements that initiated relations between the two nations. And that was the only paragraph of dissent just hours before President Richard Nixon's trip. A conversation between Kissinger and Zhou Enlai resolved the dispute. China pledged not to attack Taiwan and to allow the United States to maintain diplomatic relations with that nation. According to Zhou, the dispute would have to be resolved in 100 years, when no one in China would remember spending their summer vacations in Taiwan.

If Trump were to follow the path blazed by Kissinger and Zhou, he would reaffirm the commitment of the 1960s and focus on identifying the areas where economic interdependence serves to reinforce this new phase of US growth. One of those areas has to do with the cost of living in the United States. The North American and European middle classes have benefited from 25 years of price stability thanks to the vast Chinese factory dedicated to producing everything we need to dress and furnish our homes at prices impossible to replicate in the United States or Europe. This also allowed the United States to deepen its specialization in the digital economy. Now, China appears to have taken the lead in an area the United States has dominated since the postwar period: automobile manufacturing. The same is true of computers. An agreement between the two nations to produce Chinese-American automobiles would boost the industry in both China and the United States.

Shutting down the entire transportation industry would be a way to avoid the political problems that the economic dimension seems to herald. Because in both nations, the social contract is fraying. In the United States, thanks to two financial crises that destroyed a good portion of the middle class's savings, such as the bursting of the internet bubble in 2000 and the mortgage bubble in 2008. It's not letting up in China either. The real estate bubble has destroyed 25% of Chinese savings. And the population had decided to allow limitations on their political freedom as long as there was growth and economic progress. But that's not happening. China's growth rate today is 5%. This is a paltry rate compared to the 10% rate before COVID-19.

But building bridges across the waters of interdependence requires time and a change in the narrative between the two nations, which have been calling each other the "red peril" and the "ravenous lion" for a decade. But a change in rhetoric would not be welcomed by members of the MAGA movement, who believe clothing, appliance, and furniture manufacturing must return to the United States and China must be fought for representing a red peril.

So what will be signed now is simply a truce in which the United States sets a level of tariffs for one or two years; China reestablishes its agricultural purchases from the Midwest and briefly liberalizes rare earth exports, while the White House authorizes Silicon Valley to sell microprocessors to China, taking a US equity position in the deal.

And the truce will likely hold until what all analysts fear occurs: a correction in the capital markets. And based on the data we've seen, this outcome seems imminent. Because currently, 90% of stock market growth and 40% of US GDP are driven by companies developing artificial intelligence. These proportions are unsustainable given the levels of demand for AI. Therefore, what is needed is an agreement that deepens interdependence in order to ignite the engines of growth. Because the renewal of the respective social contracts depends on it.

«The opinions published herein are the sole responsibility of its author».