A Renewed Flashpoint in U.S.–China Trade Relations

Just days before a crucial meeting between U.S. President Donald Trump and Chinese President Xi Jinping, Washington has reignited one of the most contentious issues of their past administrations: tariffs. On Friday, U.S. Trade Representative Jamieson Greer announced a formal investigation into China’s compliance with the Phase One trade agreement signed during Trump’s first term.

The probe, launched under Section 301 of the Trade Act of 1974, authorizes the administration to determine whether Beijing failed to meet its commitments — and to impose retaliatory tariffs if necessary. “The investigation will examine whether China has fully implemented its commitments under the Phase One Agreement, the burden or restriction on U.S. commerce resulting from any non-implementation, and what action, if any, should be taken in response,” Greer’s office stated.

While such investigations can last for months, the timing is politically charged. It gives Trump new leverage heading into the South Korea summit next Thursday, a meeting already seen as pivotal to stabilizing the world’s two largest economies.

Old Deal, New Tensions

The 2020 Phase One Agreement was designed to ease trade tensions by committing China to boost purchases of U.S. goods — particularly agricultural exports like soybeans and pork — and to improve intellectual property protections. But Washington now alleges that Beijing has fallen short on those promises.

China, however, swiftly rejected the claim. Liu Pengyu, spokesperson for the Chinese embassy in Washington, said via X (formerly Twitter) that China has “scrupulously honored” the trade deal, accusing the U.S. of failing to meet its own obligations. He cited a white paper published in April outlining China’s compliance record.

The renewed dispute comes as bilateral relations deteriorate on multiple fronts: the U.S. has imposed new restrictions on technology exports, including advanced semiconductors, while Beijing has limited the export of critical rare-earth minerals, vital for the U.S. energy and defense industries.

Political Calculations and Economic Risks

Trump’s move carries both diplomatic and domestic significance. The White House has already threatened to impose 100% tariffs starting November 1 if Beijing doesn’t ease its rare-earth restrictions — a step that could further disrupt global supply chains.

At home, the impact is already being felt. China has reportedly reduced purchases of U.S. soybeans, striking a blow to American farmers who remain a key political constituency. Yet Trump has maintained that “a fair deal” with Xi is still possible, signaling that the investigation may serve as both a pressure tactic and a bargaining chip.

The probe also highlights the delicate balance Trump must navigate: demonstrating toughness on China to his domestic base, while keeping open a path toward economic stability ahead of a potentially high-stakes summit.

Global Markets on Edge

Financial markets have reacted cautiously to the announcement. Investors fear that an escalation in the trade conflict could stall global growth just as both countries grapple with slowing domestic demand and fragile post-pandemic recoveries.

Analysts note that while the investigation itself doesn’t immediately trigger new tariffs, it sets the legal foundation for rapid action — potentially within weeks. If the U.S. follows through, sectors from consumer electronics to clean energy could face new disruptions, given the depth of supply-chain interdependence between the two nations.

The coming Trump–Xi meeting now carries even greater weight. Whether it ends in renewed cooperation or a return to trade warfare could determine not only the trajectory of U.S.–China relations, but also the broader stability of global markets heading into 2026.