ast week’s US-China summit saw the two sides agree to reduce tariffs on goods worth $30 billion moving in each direction and a dialogue on artificial intelligence. Does this signal a shift towards a deep partnership, or is it merely an attempt to ease short-term tensions?

The US-China relationship entered intense economic confrontation in 2025, with Washington imposing tariffs and technology restrictions and Beijing retaliating with trade measures and rare-earth export controls. The October 30, 2025, Busan meeting produced a temporary truce, but did not resolve the underlying disputes. In 2026, the focus has shifted towards managing the confrontation, first through the May summit in Beijing and then last week’s summit, which centred on preserving the truce and managing unresolved disputes over tariffs, agriculture, critical minerals and technology.

“Progress will be incremental and transactional rather than transformative. The relationship is unlikely to lead to a deep partnership. Neither side appears eager for open confrontation in the near term,” says Pakistan’s former ambassador to China Naghmana Hashmi.

The emphasis on managing, rather than resolving, differences was reflected not only in the substance of the agreements but also in the tone of the summit. Trump’s unusually warm reception of Xi, including his decision to personally receive the Chinese president, was another indication of the effort to maintain stability in relations with Beijing.

At the summit, both leaders appeared to frame the relationship as one of competition that should be managed rather than allowed to escalate into confrontation. President Xi said the US-China competition should be “healthy” and “kept within bounds.” He said that there should be “no conflict and no confrontation.” He also said the Thucydides Trap could be overcome. President Trump, for his part, described his relationship with Xi as a “truly great friendship” built on mutual respect. He said the two countries could achieve more by focusing on shared interests.

The immediate outcome was a set of agreements on trade and AI. Questions over Taiwan, Iran and the broader economic relationship remained unresolved.

Iran was an issue where the US-China relationship intersected with broad geopolitical pressures. President Trump has favoured economic measures as a means of applying pressure. In this context, the United States has considerable leverage over Chinese entities, particularly banks. However, it has been restrained in deploying it, likely to avoid unintended consequences.

Beijing’s position at the summit was broadly consistent with its longstanding call for diplomacy. The two leaders agreed that Iran should fulfil its commitment not to develop nuclear weapons and that no country or entity should impose transit tolls on international waterways.

In the White House talks, President Xi Jinping pressed President Donald Trump to prioritise diplomacy with Iran and resolve their differences through negotiations as soon as possible. “He voiced support for Washington and Tehran returning to the Islamabad Memorandum of Understanding. He expressed hope that the two countries would reach a comprehensive agreement covering the nuclear issue and other matters, and achieve peace at an early date.”

“The message is significant for Iran and the US. China not only remains the primary importer of Iran’s oil but also retains significant strategic, political and economic leverage. Given China’s growing international weight, its call for a return to diplomacy could encourage Iran to reconsider the benefits of a prolonged conflict. It also reflects Beijing’s preference for dialogue, de-escalation and strategic restraint over escalation that could threaten global trade and economic stability and increase the risk of a global economic downturn,” says Ambassador Hashmi.

The Iran-China strategic partnership is underpinned by Chinese investment and energy ties. China buys an estimated 80-90 percent of Iran’s oil. Beyond oil, China provides dual-use technologies, satellite navigation and intelligence support. Joint naval drills and Iran’s SCO and BRICS membership deepen the alignment. “This increases pressure on Iran to seek a settlement. Prolonged conflict risks further isolating Tehran and threatening the oil revenues that keep the system afloat,” says Hashmi.

Iran was another issue where the US-China relationship intersected with broad geopolitical pressures. President Trump has favoured economic sanctions as a means of applying pressure. Beijing’s position at the summit was broadly consistent with its longstanding call for diplomacy. The two leaders agreed that Iran should fulfil its commitment not to develop nuclear weapons.

China’s diplomatic push has coincided with Iranian leaders taking the stage in New York. President Pezeshkian addressed the UN General Assembly and Foreign Minister Abbas Araghchi joined mediated discussions on the sidelines. The latter conveyed Tehran’s new peace proposals, including lifting the US naval blockade and addressing broader hostilities within seven days. Other reports have pointed to a 60-day phased approach, building on the Islamabad Memorandum of Understanding, to clear and reopen the Strait of Hormuz for commercial shipping, ease blockades and create space for wider talks on nuclear and security issues.

China’s push for talks has given Washington a small diplomatic opening, potentially reducing the risk of immediate escalation and buying time ahead of the mid-term US elections.

According to Hashmi, “With the November elections just weeks away, the nearly seven-month conflict has become a major drag on President Donald Trump and Republicans.” Polls show that most Americans see the war as not worth the cost. Only about a third approve of Trump’s handling of it and his overall approval has fallen to a career low of 32 percent.

President Trump’s rejection of Iran’s latest proposal suggests that Washington is in no hurry to translate that principle into an immediate diplomatic settlement. It does not necessarily mean that diplomacy has ended. “While he publicly dismissed Tehran’s offer to reopen the Strait of Hormuz and resume nuclear talks, US officials have continued to describe discussions through regional mediators as positive and constructive.”

Economic ties with China remain a stabiliser for the United States. It relies on Chinese manufacturing inputs and, critically, rare earth supply chains. China controls roughly 70 percent of global rare earth metals production and more than 90 per cent of processing. China also needs access to the US market and technology.

“The mutual dependence encourages both sides to keep negotiating on trade and supply-chain issues rather than risk a break,” says Hashmi.

The two countries agreed on more favourable tariff treatment for $30 billion of non-sensitive goods in each direction, covering US agricultural products, wood and cosmetics, among other goods, and Chinese consumer products such as small appliances, toys and decorations. This followed a two-month extension of a trade truce, set to expire on November 10, allowing more time to work on a potentially bigger trade deal.

Agriculture was an important part of the economic discussions, with China continuing to implement commitments to purchase US farm products. “Ahead of the summit, US farmers were pressing Trump to secure greater Chinese purchases. Stronger agricultural trade could provide a political boost for Trump and Republicans before the November mid-term elections,” says Hashmi.

Artificial Intelligence provided another area of limited cooperation as the two leaders hinted at differences in their approach to regulating AI development. There was broad agreement on the risks. They agreed to hold a dialogue on AI’s risks and benefits, with the next round of discussions set for November and to establish a communication channel for AI-related incidents. “The differing approaches leave room for dialogue on shared safeguards even as the two countries continue to compete over AI capabilities and technological leadership.”

“If trade and AI provided limited areas for cooperation, Taiwan remained the clearest test of the limits of that accommodation.”

Taiwan remains Beijing’s principal red line, says Hashmi. Xi’s demand that the US “oppose Taiwan independence and handle the issue with prudence,” shows that China expects movement from Washington.

Taiwan arms sales remain a sensitive issue. In December 2025, the Trump administration notified Congress of an $11.1 billion arms package for Taiwan. A separate package worth up to $14 billion was subsequently held up. After meeting Xi Jinping in May 2026, Trump said he was keeping the package on hold, calling it a “very good negotiating chip.” Later, US Secretary of State Marco Rubio announced that the $14 billion US arms package for Taiwan was “under review.”

Hashmi says “China’s growing military and economic power alongside its growing global stature, has sharply constrained the prospect of formal Taiwanese independence.” Its expanding naval, missile, air and technological capabilities give Beijing substantial means to deter or respond to any move towards independence. The United States is aware of this strategic reality. “While Washington provides Taiwan with defensive capabilities to deter Chinese coercion, it has not formally committed to defending Taiwan under all circumstances,” explains Hashmi.

Some regional experts have described the meeting as a modest US-China confidence-building effort. Neither side appears convinced that it has resolved the deep strategic tensions shaping their relationship. “The immediate question is whether Washington and Beijing can sustain a wary coexistence or whether competition will again harden into sharper rivalry. Much will depend on the US side, particularly whether the Trump administration can manage domestic political and strategic pressures that favour a tougher approach towards China.”

The diplomatic gains leave room for continued engagement. Beijing appears willing to accommodate where it sees room for stabilization. More meetings this year could help consolidate the improved atmosphere. Meanwhile, the underlying rivalry remains intact and continued political and strategic pressure in Washington for a tougher approach towards China could constrain the scope for lasting progress.

The writer is a senior The News staffer in Karachi.