Trump, Xi seek trade stability and deals, but AI, tariffs and Iran loom large. What to watch

The two leaders are expected to seek ways to strengthen their fragile trade truce when they meet in Washington for their second face-to-face summit this year.

Despite gestures of goodwill surrounding the lead-up to the summit, the two sides continue to lob accusations and launch retaliatory trade actions.

Treasury Secretary Scott Bessent, in an interview with CNBC’s “Squawk Box” on Monday, said the “great respect” Trump and Xi have for each other trickles down to broader U.S.-China negotiations.

He then noted, “We had some deliverables that have not been completely fulfilled” by China as part of a trade agreement Trump and Xi reached in Busan, South Korea, nearly a year ago.

Some China analysts have raised concerns about the unusually top-down diplomatic arrangement between the two economic superpowers.

“A number of inconsistent viewpoints seem to be jostling each other,” as Trump dictates “the overarching approach” toward China “while letting more negative actions occur at the margins,” said Claire Reade, a senior associate with the Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies.

The summit comes with less than six weeks left in a U.S. election cycle that has largely centered on Americans’ cost of living concerns. Trump, whose polling marks on that key issue have sunk to new lows, has even more of an incentive to emerge from the summit with Xi touting some form of economic deal.

Here’s where the U.S.-China trade relationship stands and what’s at risk when Trump and Xi meet:

Those tariffs were slashed in May 2025 after trade negotiators in Switzerland struck a temporary deal, which was extended in mid-August. Trump and Xi then made an agreement in Busan that led the countries to further scale back their tit-for-tat trade measures.

As part of that deal, China agreed to suspend export controls on rare earths and buy U.S. agricultural products, while the U.S. reduced some tariffs and suspended other trade retaliation. That deal was set to last for one year, and will expire Nov. 10, a week after the U.S. election, absent an extension.

Despite the cooldown, both countries continue to impose high tariffs on each other’s goods, multiple analyses show. As of July, the effective tariff rate of 22.8% on Chinese products is the highest among major U.S. trading partners, with steel and aluminum imports facing the heaviest duties, according to the Penn Wharton Budget Model from the University of Pennsylvania.

The Congressional Research Service’s estimate is even higher, calculating the U.S. average tariff rate on China in July at roughly 36.5%, versus Beijing’s 31% rate on U.S. goods.

U.S. trade with China fell sharply in 2025, with total goods trade declining nearly 30% from the prior year – and the first seven months of 2026 show a continued decline, according to U.S. Census data. But Beijing remains a major economic partner with Washington, behind only Mexico and Canada. As recently as 2019, China was the largest U.S. trading partner.

Trump has long complained about the large trade deficits the U.S. maintains with other countries, including China, while advocating for a domestic manufacturing resurgence. While the U.S. goods trade deficit with China so far this year is lower than the same period in 2025, it remains among the highest in the world at roughly $91.2 billion.

Many China watchers expect a similar outcome this time.

A one-year extension of the trade truce is “our base case,” China analysts from Bank of America Global Research said in a client note last week. That extension would maintain the status quo on tariffs and bar new export controls, a major sticking point before the Busan meeting.

China could also agree to make additional purchases of U.S. goods, “potentially including more Boeing aircraft,” they wrote. After Beijing, the countries confirmed that China would buy 200 Boeing planes, a smaller number than some investors had expected.

“We expect limited progress elsewhere,” including on the prospect of expanding access to advanced semiconductors or changing export controls that remain in place, the bank’s analysts said.

Other China experts agreed. 

Both Trump and Xi “appear to be managing for small gains and conflict avoidance,” Ryan Hass, director of the Brookings Institution’s John L. Thornton China Center, told CNBC in an email.

“The uneasy equilibrium sustains because it serves two functions for both leaders,” Hass explained. “First, it gives both leaders an ability to signal to their citizens that they have the situation with their foremost geopolitical rival under control. Second, it buys time and space for both leaders to reduce dependencies and vulnerabilities from the other.”

Bessent seemed to confirm some of those predictions Monday morning, telling CNBC, “I think we’re going to maintain” the tariff truce.

“That was a focal point” of talks over the weekend with Chinese Vice Premier He Lifeng, Bessent said, adding, “We’ve had great stability in the relationship since last fall.”

Bessent also suggested progress was made on an arrangement for a reciprocal $30 billion tariff reduction, which Beijing floated earlier this month.

Bessent said U.S. Trade Representative Jamieson Greer has “operationalized” that proposal, which he called a “30-by-30 trade deal for non-critical goods.”

The U.S. side of the deal would involve selling agriculture, energy and other products such as medical devices, while China “would be bringing in more everyday items,” Bessent told CNBC.

Reade, of CSIS, told CNBC the U.S. may only want a limited extension of the trade truce.

That truce is a key source of U.S. leverage, and “they’re not going to want to let go of that leverage on the truce [by letting it] extend too far into the future,” said Reade, who was an assistant U.S. trade representative for China during the Obama administration.

“There is a SICK conspiracy going on against AI and Data Centers, and the only one that is happy about it is China,” Trump wrote on Truth Social last week. “WHOEVER WINS AI, WINS! We are leading China, and all others, and will continue to do so.”

Some heads of AI companies in the U.S., however, have sounded alarms about the potentially catastrophic risks posed by advanced AI models developing too quickly.

Those calls have drawn rebukes from Trump. But in a Truth Social post on Monday, Trump said the government “will rein things in if we have to” — suggesting at least a slight shift away from his more laissez-faire stance that could carry into talks with Xi.

Bessent said Sunday that he and his Chinese counterparts discussed establishing a dialogue that would allow for the two countries to notify each other about AI incidents.

A senior U.S. official told reporters last week that CEO attendees at Thursday’s state dinner will include Amazon‘s Jeff Bezos, Elon Musk of Tesla and SpaceX, Google‘s Sundar Pichai, Michael Dell of Dell and Apple executive board chairman Tim Cook. CNBC has previously reported the planned attendance of JPMorgan Chase CEO Jamie Dimon, Citigroup chief Jane Fraser, Nvidia CEO Jensen Huang and OpenAI’s Sam Altman.

Other signs have emerged that Trump is planning a lavish affair for the Chinese leader. First Lady Melania Trump’s office reportedly said the ceremony for Xi will include a presidential salute from U.S. Marines on the White House South Lawn, followed by a military review in the Rose Garden featuring rooftop herald trumpets and concluding with a multi-aircraft flyover.

The first lady last week posted a video hyping up her meticulous planning for the state dinner. The president himself will greet Xi on the tarmac upon his arrival at Joint Base Andrews in Maryland.