Snap Insight: Though Trump-Xi summit achieves little, 2026 is a high point in US-China relations

Despite the considerable fanfare and meticulously orchestrated optics surrounding the encounter, the latest high-level meeting between the leaders of the world’s two largest economies yielded only a superficial extension of a trade truce until January 2027. This temporary reprieve, celebrated by some as a de-escalation, masks a deeper reality: the fundamental grievances that have fueled the US-China rivalry remain entrenched and largely unaddressed. The trade war, a defining feature of the relationship for nearly a decade, persists in its various forms, as do the myriad other points of contention spanning technology, human rights, geopolitical influence, and regional security.

The United States’ long-standing grievances regarding China’s trade practices continue to be a significant irritant. These concerns, which first prompted then-President Trump to impose tariffs during his initial term, encompass allegations of intellectual property theft, forced technology transfers, state-sponsored subsidies distorting global markets, and persistent barriers to market access for American companies. A new and increasingly urgent concern on Washington’s agenda is China’s growing industrial "excess capacity," particularly in sectors like electric vehicles, solar panels, and steel. The fear is that heavily subsidized Chinese industries are producing goods at volumes that overwhelm global demand, leading to depressed prices and threatening the viability of nascent green industries in the US and allied nations.

Conversely, Beijing remains steadfast in its opposition to what it views as protectionist and discriminatory measures by the US. This includes the retaliatory tariffs that have impacted Chinese exports, as well as a growing array of export controls and investment restrictions targeting critical Chinese technology firms and strategic industries. China asserts that these measures are designed to stifle its economic development and technological advancement, rather than genuinely address fair trade concerns.

Time is Running Out for Meaningful Progress Amidst Deepening Distrust

Even with the elaborate pageantry and the apparently warm personal relationship cultivated between the two leaders – exemplified by President Trump’s reversal of protocol to personally meet President Xi on the tarmac – little tangible progress has been made to alter the fundamental trajectory of the relationship. As the final year of President Trump’s current term approaches, the window for achieving substantive breakthroughs is rapidly narrowing.

"The window for Mr Trump to negotiate with Xi is closing on meaningful progress," stated Michael Hart, President of AmCham China, underscoring the dwindling opportunities for impactful diplomacy. He further elaborated, "The two bilateral meetings were probably the best opportunity to negotiate. I’m hopeful, but it’s unlikely big deals will be announced in the next potential meetings like APEC and G20." This sentiment reflects a broader consensus among analysts: the low-hanging fruit of a simple trade truce has been picked, leaving behind the thorny, systemic issues that neither side seems willing or able to compromise on. The political will required for truly transformative agreements appears to be absent, overshadowed by domestic political pressures and deeply ingrained strategic competition.

Adding to this complexity, while the diplomatic niceties played out at the summit, the machinery of US national security policy continued its relentless focus on containing China’s technological ascent. This parallel track underscores the bipartisan consensus in Washington regarding the strategic threat posed by China’s technological ambitions.

In June, for instance, the US Commerce Department moved to close a critical loophole that had allowed Chinese-owned companies operating abroad to purchase advanced Artificial Intelligence (AI) chips, effectively tightening the net on Beijing’s access to crucial components for its burgeoning AI sector. This measure built upon earlier restrictions, signaling Washington’s determination to prevent China from leveraging global supply chains for its military and surveillance capabilities. Just a month later, in July, the Federal Communications Commission (FCC) took action to block the import of foreign-made power inverters, commonly used in solar grids, and advanced robots, citing national security risks. These components, while seemingly benign, are critical infrastructure elements and foundational technologies for future industrial automation, making their origin and potential vulnerabilities a key concern for US policymakers.

Further illustrating this hardening stance, the US Congress earlier this year introduced a bipartisan bill aimed at tightening controls on chipmaking tools. This legislative effort complements executive actions, reflecting a broad, cross-party agreement that safeguarding US technological leadership, particularly in semiconductors, is paramount. This legislative push is particularly significant as it demonstrates that the strategic competition with China is not solely a presidential initiative but a deeply ingrained policy direction supported across the political spectrum.

The upcoming midterm elections in the United States could further intensify this trajectory. With the Democratic Party poised to potentially gain control of the House of Representatives, and possibly the Senate, the expectation is for continued, if not accelerated, US action against China. This is especially true in the realm of artificial intelligence. The US-China race for AI supremacy has emerged as one of the few areas where Democrats and Republicans find significant common ground, transcending partisan divides. Both parties view leadership in AI as crucial for future economic prosperity, national security, and global influence, ensuring that policy measures aimed at constraining China’s AI development will likely remain a top priority, regardless of which party controls Congress.

High Stakes for Asia and the Global Economy

For the broader Asian region, the implications of this enduring US-China stalemate are far more profound than the diplomatic headlines suggest. The ongoing US Section 301 investigations into issues such as excess capacity and forced labor practices in China send an unambiguous message: the region remains central to America’s "America First" trade policy. This policy, far from being a relic of the past, continues to prioritize addressing what Washington perceives as unfair trade practices, reducing the US trade deficit, and encouraging the reshoring or "friend-shoring" of manufacturing and investment back to the United States or trusted allies. Asian economies, deeply integrated into global supply chains that often pass through China, face the difficult task of navigating these evolving trade dynamics, balancing economic opportunities with geopolitical risks.

Taiwan, in particular, remains a critical flashpoint and a top priority for President Xi Jinping. During his meeting with President Trump, Xi reiterated Beijing’s firm stance, urging the US to oppose "Taiwan independence" and uphold the "One China" principle. The delicate balance surrounding Taiwan has been further complicated by Washington’s decision to put on hold a substantial US$14 billion Taiwan arms package since May. President Trump, characterizing it as a "very good negotiating chip," has indicated its potential use in broader US-China discussions. However, the longer this arms package remains suspended, the more Beijing may interpret it as a sign that Taiwan’s defense is negotiable, potentially emboldening its ambitions and increasing its demands for concessions. This strategic ambiguity, while historically aimed at maintaining peace, now faces renewed scrutiny as both sides test its limits.

Beyond economic and technological competition, the global geopolitical landscape presents a significant wildcard: the war with Iran. China remains Tehran’s largest oil customer, a relationship driven by Beijing’s insatiable energy demands and its desire for diversified supply sources. This economic lifeline provides critical support to the Iranian regime. The potential for rapid escalation looms large if Chinese support for the regime is ever directly linked to actions that result in harm to American forces in the Middle East. Such a development would instantly transform a complex geopolitical rivalry into a direct confrontation with potentially devastating global consequences, injecting an unpredictable element into the already strained US-China relationship.

A Stalemate, Not Peace: The New Normal for Global Business

Business leaders and investors should exercise caution and not mistake the recent diplomatic atmospherics for a safer or more stable operating environment. The handshake between leaders, the extended trade truce, and the polite exchanges do not signify a fundamental de-escalation or a path towards genuine peace. Instead, the US and China have arrived at a complex stalemate – a situation where neither side has found a clear opening to decisively "win" the broader strategic competition, but neither is willing to back down on core issues.

This "new normal" of the US-China relationship, characterized by incremental advancements and limited deterioration, is likely to persist for some time. It is plausible that 2026, with its high-profile summits and a temporary trade truce, will be remembered as a relative high point in US-China relations, a period of fragile equilibrium rather than a turning point towards resolution.

In this environment, a status quo where tariffs from each side do not skyrocket, where critical resources like rare earths remain mostly available to the US, where China continues to make enough strategic purchases from the US to avoid complete economic rupture, and where the fragile peace across the Taiwan Strait is maintained, may represent the most ideal outcome that Washington and Beijing can realistically expect. This equilibrium, however, is inherently unstable, underpinned by deep-seated strategic rivalry, technological competition, and geopolitical flashpoints that could erupt at any moment. Navigating this complex and often contradictory landscape will remain the defining challenge for policymakers, businesses, and indeed, the global community for the foreseeable future.

Steven Okun is CEO of APAC Advisors, a geostrategic and responsible investment consultancy based in Singapore. He served as Deputy General Counsel at the US Department of Transportation in the Administration of President Bill Clinton.