Trump goes back to the future with China deal

President Trump and Chinese leader Xi Jinping have announced the general terms of a new trade deal, covering areas like agriculture and technology. This agreement closely resembles previous deals made between the two leaders over the past six years, many of which ultimately failed or were abandoned. Specific elements, such as agriculture, rare earths, and export controls, have been part of past negotiations that often reverted to previous states of tension. Many prior pronouncements, including the "Phase One" deal and a rare earths truce, saw the situation largely reset within months. The current announcement appears to be a temporary resolution, with general assurances rather than a firm, mutually binding agreement. This suggests the possibility of disputes and renewed trade tensions in the near future. The agreement to resume rare earth exports and soybean purchases largely mirrors conditions before tariffs were imposed. However, a significant 47% tariff on Chinese exports remains, negatively impacting businesses and consumers. Markets reacted with caution, welcoming agricultural sales but ultimately desiring the removal of tariffs that strain profit margins. While the deal may offer some relief to businesses, it does not address fundamental structural issues and carries risks for the Chinese economy. A key component is a one-year truce on rare earth exports, a critical resource for which China dominates global supply. Past truces on rare earths were short-lived, raising questions about the U.S.'s ability to reduce its dependence on China within this year. The potential for renewed trade wars remains high if China restricts exports or either leader deems the current deal ineffective.